This document discusses the preparation of a statement of financial position (SFP) using both the report form and account form, with proper classification of items as current or non-current. It provides definitions and examples of current assets, non-current assets, current liabilities, and non-current liabilities. The key criteria for classifying items as current or non-current are also outlined. Sources used in compiling this information are cited at the end.
This document discusses the preparation of a statement of financial position (SFP) using both the report form and account form, with proper classification of items as current or non-current. It provides definitions and examples of current assets, non-current assets, current liabilities, and non-current liabilities. The key criteria for classifying items as current or non-current are also outlined. Sources used in compiling this information are cited at the end.
This document discusses the preparation of a statement of financial position (SFP) using both the report form and account form, with proper classification of items as current or non-current. It provides definitions and examples of current assets, non-current assets, current liabilities, and non-current liabilities. The key criteria for classifying items as current or non-current are also outlined. Sources used in compiling this information are cited at the end.
This document discusses the preparation of a statement of financial position (SFP) using both the report form and account form, with proper classification of items as current or non-current. It provides definitions and examples of current assets, non-current assets, current liabilities, and non-current liabilities. The key criteria for classifying items as current or non-current are also outlined. Sources used in compiling this information are cited at the end.
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Fundamentals of Accountancy, Business and
Management 2
Name: John Andre A. Hedigallage July 20, 2018
Professor: Celestino Concepcion
Preparation of SFP using the report form
and the account form with proper classification of items as current and non- current
Written Report Current Assets A current asset is an item on an entity's balance sheet that is either cash, a cash equivalent, or which can be converted into cash within one year. Current assets include cash and cash equivalents, accounts receivable, inventory, marketable securities, prepaid expenses. and other liquid assets that can be readily converted to cash. It is also called short term asset.
If an organization has an operating cycle lasting more than one year, an asset is still classified as current as long as it is converted into cash within the operating cycle.
It is expected to be realized, or is intended for sale or consumption within
the entity’s normal operating cycle. It is held primarily for the purpose of being traded It is expected to be realized within the twelve months after the balance sheet date. It is cash or cash equivalent unless it’s restricted from being exchanged or used to settle a liability for at least twelve months after the balance sheet date.
All other assets shall be classified as non-current.
Non Current Assets
A noncurrent asset is an asset that is not likely to turn to unrestricted cash
within one year of the balance sheet date. A noncurrent asset is also referred to as a long-term asset.
Noncurrent assets are reported under the following balance sheet headings:
Investments (long-term) Property, plant and equipment Intangible assets Other assets
Examples:
Long term insurance
Loans payable ( long term) Long term Investments Land buildings Equipments Furnishings Vehicles Deferred income tax Current Liabilities Current liabilities are a company's debts or obligations that are due within one year or within a normal operating cycle. Furthermore, current liabilities are settled by the use of a current asset, such as cash, or by creating a new current liability. Current liabilities appear on a company's balance sheet and include short- term debt, accounts payable, accrued liabilities, and other similar debts.
Example:
Accounts payable. These are the trade payables due to suppliers,
usually as evidenced by supplier invoices. Sales taxes payable. This is the obligation of a business to remit sales taxes to the government that it charged to customers on behalf of the government. Payroll taxes payable. This is taxes withheld from employee pay, or matching taxes, or additional taxes related to employee compensation. Income taxes payable. This is income taxes owed to the government but not yet paid. Interest payable. This is interest owed to lenders but not yet paid. Bank account overdrafts. These are short-term advances made by the bank to offset any account overdrafts caused by issuing checks in excess of available funding. Accrued expenses. These are expenses not yet payable to a third party, but already incurred, such as wages payable. Customer deposits. These are payments made by customers in advance of the completion of their orders for goods or services. Dividends declared. These are dividends declared by the board of directors, but not yet paid to shareholders. Short-term loans. This is loans that are due on demand or within the next 12 months. Current maturities of long-term debt. This is that portion of long-term debt that is due within the next 12 months. Criteria: It is a expected to be settled in the entity’s normal operating cycle. It is held primarily for trading It is due to be settled within twelve months after the balance sheet date The entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date.
Non Current Liabilities
Non-current liabilities are long-term liabilities, which are financial obligations of a company that will come due in a year or longer. Non-current liabilities are reported on a company's balance sheet along with current liabilities, assets, and equity.
Examples:
Bonds payable. Long-term loans. Capital leases. Pension liabilities. Postretirement healthcare liabilities. Deferred compensation. Deferred revenues. Deferred income taxes. Statement of Financial Position using Report form A report form balance sheet is a balance sheet that presents asset, liability, and equity accounts in a vertical format. In financial reporting, there are two general formats for balance sheets. Statement of Financial Position using Account form
The account form balance sheet is a financial statement format where the assets are reported on the left side and the liabilities and equity are reported on the right side. The account format is kind of a visual representation of the accounting equation. Sources:
Bragg, S. (2018, February 2). Current Asset. Accounting Tools. Retrieved
from : https://www.accountingtools.com/articles/2017/5/4/current-asset
Averkamp, H. (2018). What is a non current Asset?. Accounting Coach.
