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Financial Accounting Course |
| U.S. GAAP Codification | Accounting Topics |
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Asset Accounts 01 Examples and Practice Questions |
| U.S. GAAP Codification, Accounting by Topic, Accounting Terms |
| Financial Accounting, Intermediate Accounting, Advanced Accounting |
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Assets 1. Assets represent future economic benefits 2. Assets have normal balances on the debit side 3. Increases in asset accounts are recorded on the debit side 4. Decreases in asset accounts are recorded on the credit side Classification of assets 1. Assets are classified as current and noncurrent assets 2. Current assets are expected to be converted to cash or consumed --> within a year or normal operating cycle whichever is longer --> Codification link to current assets 3. Current assets include the following (1) Cash and cash equivalents (2) Receivables, current (3) Investments, current (4) Inventories (5) Prepaid expenses 4. Noncurrent assets are expected to be converted to cash or consumed --> after a year or normal operating cycle whichever is longer 5. Noncurrent assets include the following (1) Receivables, noncurrent (2) Investments, noncurrent (3) Property, plant and equipment (4) Intangible assets (5) Other noncurrent assets Net working capital 1. Net working capital = Current assets - Current liabilities 2. Net working capital measures the margin of current assets over current liabilities 3. More net working capital implies that the entity has more liquidity Current ratio 1. Current ratio = Current assets / Current liabilities 2. Current ratio measures whether the entity has enough current assets to pay off current liabilities.
Practice Questions 1. Current assets = $300,000, Current liabilities = $200,000 2. What is the amount net working capital? Net working capital = current assets - current liabilities = $300,000 - $200,000 = $100,000 3. What is the current ratio? Current ratio = Current assets / Current liabilities = $300,000 / $200,000 = 1.50 |
Examples of current assets
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Examples of noncurrent assets
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Codification Topics at the 100 Level |
| Topic 105: Generally Accepted Accounting Principles |
| U.S. GAAP by Topic |
| Accounting Topics |
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