WSP Accounting Crash Course (The Balance Sheet)
questions with verified answers
A/P Ans✓✓✓ a current liability representing amounts owed by the company to
suppliers for prior purchases or services
A/R (asset) Ans✓✓✓ a/r represents sales that a company has made on credit; the
product has been sold and delivered, but the company has not yet received the
cash on sale
Accrued expenses Ans✓✓✓ current liability (or LT, depending on due date)
representing expenses that have already been incurred but not yet paid
asset sales Ans✓✓✓ If a company chooses to sell some of their ppe, the
associated gross ppe balance (and accumulated depreciation) is removed from
the balance sheet, offset by:
The cash received, and (when applicable):
Any gain/loss on the IS
Assets Ans✓✓✓ represent the company's resources
requirements: company must own the resource
The resource must be of value
The resource must have a quantifiable measurable cost
Going down in order of liquidity
, -Cash= most basic asset
-Marketable securities (also known as investments) = like cash, less liquid
-A/R = money that is coming in to the company
-Inventories includes the direct coats associated with production of goods
-Prepaid expenses is a bit less intuitive and more tricky
-PP&E is straightforward
-Intangibles & Goodwill: things acquired at some point by the company in the past
and now have value based on the company's rights on the thing
Assets, liabilities, equity relationship Ans✓✓✓ A = L + E
Assets are a use of funds, L+E are sources of funds (how it pays for assets)
Balance Sheet def Ans✓✓✓ reports the company's resources (assets) and how
those resources were funded (liabilities and shareholders equity) on a particular
date (end of the quarter, end of the year)
fundamental equation: A = L + E
Common equity categories Ans✓✓✓ -Preferred stock: stock that has special
rights and takes priority over common stock
-Common stock: represents capital received by a company when it issues shares
-Treasury stock: common stock that has been issued then reacquired (brought
back) by a company (basically a reduction of equity as company uses resources to
purchase shares; it is a contra account)
questions with verified answers
A/P Ans✓✓✓ a current liability representing amounts owed by the company to
suppliers for prior purchases or services
A/R (asset) Ans✓✓✓ a/r represents sales that a company has made on credit; the
product has been sold and delivered, but the company has not yet received the
cash on sale
Accrued expenses Ans✓✓✓ current liability (or LT, depending on due date)
representing expenses that have already been incurred but not yet paid
asset sales Ans✓✓✓ If a company chooses to sell some of their ppe, the
associated gross ppe balance (and accumulated depreciation) is removed from
the balance sheet, offset by:
The cash received, and (when applicable):
Any gain/loss on the IS
Assets Ans✓✓✓ represent the company's resources
requirements: company must own the resource
The resource must be of value
The resource must have a quantifiable measurable cost
Going down in order of liquidity
, -Cash= most basic asset
-Marketable securities (also known as investments) = like cash, less liquid
-A/R = money that is coming in to the company
-Inventories includes the direct coats associated with production of goods
-Prepaid expenses is a bit less intuitive and more tricky
-PP&E is straightforward
-Intangibles & Goodwill: things acquired at some point by the company in the past
and now have value based on the company's rights on the thing
Assets, liabilities, equity relationship Ans✓✓✓ A = L + E
Assets are a use of funds, L+E are sources of funds (how it pays for assets)
Balance Sheet def Ans✓✓✓ reports the company's resources (assets) and how
those resources were funded (liabilities and shareholders equity) on a particular
date (end of the quarter, end of the year)
fundamental equation: A = L + E
Common equity categories Ans✓✓✓ -Preferred stock: stock that has special
rights and takes priority over common stock
-Common stock: represents capital received by a company when it issues shares
-Treasury stock: common stock that has been issued then reacquired (brought
back) by a company (basically a reduction of equity as company uses resources to
purchase shares; it is a contra account)
