2ChapterBalance Sheet Changes;Income MeasurementWHUTAccountingdepartmentofmanagementschool
WHUT Accounting department of management school Balance Sheet Changes; Income Measurement Chapter 2
Learning ObjectivesC1: Explain the meaning of the principal itemsreported on a balance sheet.C2: The major elements of income statement.C3: The relationship between balance sheet itemschanges and revenue/expenseWHUTAccountingdepartmentofmanagementschool
WHUT Accounting department of management school Learning Objectives C1: Explain the meaning of the principal items reported on a balance sheet. C2: The major elements of income statement. C3: The relationship between balance sheet items changes and revenue/expense
1.OperatingCycleCashCollectionsPurchasesInventoriesReceivablesSalesWHUTAccountingdepartmentofmanagementschool
WHUT Accounting department of management school Receivables Cash Inventories Collections Purchases Sales 1. Operating Cycle
2. Current AssetsCurrent assets are cash and other assets that areexpected to be converted into cash, sold, orconsumed within one year or the normaloperating cycle, whichever is longer. Cash and cash equivalentTemporary investments in marketablesecurities Accounts and notes receivableInventoriesPrepaid itemsWHUTAccountingdepartmentofmanagementschool
WHUT Accounting department of management school Current assets are cash and other assets that are expected to be converted into cash, sold, or consumed within one year or the normal operating cycle, whichever is longer. 2. Current Assets • Cash and cash equivalent • Temporary investments in marketable securities • Accounts and notes receivable • Inventories • Prepaid items
Cash includes cash on hand and readilyavailable in checking and savings accountsCash equivalents are risk-free securities, suchas money market funds and treasury bills thatwill mature in three months or less from thedate acquired by the holderWHUTAccountingdepartmentofmanagementschool
WHUT Accounting department of management school Cash includes cash on hand and readily available in checking and savings accounts. Cash equivalents are risk-free securities, such as money market funds and treasury bills that will mature in three months or less from the date acquired by the holder