1. The Balance Sheet and Financial Disclosures
Intermediate Accounting I
Chapter 3

2. CLASSIFIED BALANCE SHEET
 Assets:
Current assets Investments Property, plant, and equipment Intangible assets Other assets
Liabilities:
Current liabilities Long-term liabilities
Shareholders’ equity:
Paid-in capital Retained earnings
The classified balance sheet presents assets, liabilities, and equity broken down by specific classifications.

3. CURRENT ASSETS
Current assets include cash and all other assets expected to become cash or be consumed within one year or the operating cycle, whichever is longer.

4. CURRENT ASSETS Cash and Cash Equivalents Short-term Investments
Cash Equivalents include liquid investments that have a maturity date of three months or less from the date of purchase, such as:
Short-term Investments
Investments are classified as current if the company’s management
▶ intends to liquidate the investment in the next year or operating cycle, whichever is longer, and
▶ has the ability to do so, i.e., the investment is marketable.
Accounts Receivable
Inventories
Prepaid Expenses

5. NONCURRENT ASSETS
Noncurrent assets are expected to last longer than one year.

6. NONCURRENT ASSETS Investments
 Assets not used directly in the operations of the business.
Property, Plant, and Equipment
 Tangible, long-lived assets used in the operations of the business.
 They are usually the primary revenue-generating assets of the business.
Intangible Assets
 They lack physical existence.
 Exclusive rights to something — a product, process, etc.
Other Assets
 A catch-all classification that includes long-term prepaid expenses, called deferred charges, and any noncurrent asset not falling in one of the other classifications.

7. LIABILITIES
Liabilities are probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events.

8. CURRENT LIABILITIES
Current liabilities are those obligations that are expected to be satisfied within one year or the operating cycle, whichever is longer.

9. CURRENT LIABILITIES Accounts Payable
 Obligations to suppliers of merchandise or services purchased on open account.
 Payment usually is due in 30 to 60 days.
Notes Payable
 Written promises to pay cash at some future date.
 Usually require the payment of explicit interest.
Unearned Revenues
 Represent cash received from a customer for goods or services to be provided in a future period.
Accrued Liabilities
 Obligations created when expenses have been incurred but won't be paid until a subsequent reporting period.
Current Maturities of Long-term Debt
 Amounts from long-term debt, such as mortgages, due in the current period

10. LONG-TERM LIABILITIES
Long-term liabilities are those obligations that are not expected to be satisfied within one year or the operating cycle, whichever is longer.

11. SHAREHOLDERS’ EQUITY
The shareholders' equity section of the balance sheet includes paid-in capital (invested capital), treasury stock, and retained earnings (earned capital).
Paid-in Capital
Par Value of Preferred and/or Common Stock
Paid-in capital in excess of par for Preferred and/or Common Stock
Treasury Stock
Shares of stock re-acquired by a company
Reduces total equity
Retained Earnings
Earnings retained by the company rather than being distributed as dividends

12. RETAINED EARNINGS CALCULATION
Beginning Retained Earnings (as shown on the trial balance) Add Net Income (or Deduct Net Loss)
Deduct Dividends
Equals Ending Retained Earnings (reported on the balance sheet)

13. Summary of Significant Accounting Policies
DISCLOSURE NOTES
Disclosure notes explain or elaborate on the data presented in the financial statements.
Summary of Significant Accounting Policies
Conveys valuable information about the company’s choices from among various alternative accounting methods.
Subsequent Events
A significant development that occurs after the company’s fiscal year-end but before the financial statements are issued or available to be issued.
Noteworthy Events and Transactions
Transactions or events that are potentially important to evaluating a company’s financial statements, e.g., related-party transactions, errors and irregularities, and illegal acts.

14. The Balance Sheet and Financial Disclosures
Intermediate Accounting I – Chapter 3
END OF PRESENTATION