ACCOUNTING ACROSS THE ORGANIZATION
Yale Express, a short-haul trucking firm, turned over much of its cargo to local
truckers to complete deliveries and waited 20 days to receive the local truckers’
until months after the year-end.
What might Yale Express have done to produce more accurate financial state-
ments without waiting months for Republic’s outstanding transportation bills?
experience and the current volume of business.)
F. The Classified Balance Sheet.
1. Current assets are assets that a company expects to convert to cash or
2. Long-term investments are generally investments in stocks and bonds of
in operations, and long-term notes receivable.
are very valuable.
6. Long-term liabilities are obligations that a company expects to pay after
one year.
7. The content of the owner’s equity section varies with the form of business
organization. In a proprietorship, there is one capital account but corpo-
rations divide owner’s equity into Common Stock and Retained
Earnings.
*G. Reversing Entries.
1. Companies make reversing entries at the beginning of the next account-
entry made in the previous period.
cycle.
3. The use of reversing entries does not change the amounts reported in
the financial statements.
IFRS
A Look at IFRS
The classified balance sheet, although generally required internationally, contains certain
variations in format when reporting under IFRS.
KEY POINTS
The procedures of the closing process are applicable to all companies, whether they are
using IFRS or GAAP.
position” rather than balance sheet.
The format of statement of financial position information is often presented differently
under IFRS. Although no specific format is required, most companies that follow IFRS
present statement of financial position information in this order:
Noncurrent assets
Current assets
Equity
Noncurrent liabilities
Current liabilities
current and noncurrent assets and liabilities.
Under IFRS, current assets are usually listed in the reverse order of liquidity. For
example, under GAAP cash is listed first, but under IFRS it is listed last.
Some companies report the subtotal net assets, which equals total assets minus total
liabilities. See, for example, the statement of financial position of Zetar plc in Appendix
C.
Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Instructor’s Manual (For Instructor Use Only) 4-11
Both IFRS and GAAP require disclosures about (1) accounting policies followed,
(2) judgments that management has made in the process of applying the entity’s
accounting policies, and (3) the key assumptions and estimation uncertainty that could
result in a material adjustment to the carrying amounts of assets and liabilities within the
next financial year.
Comparative prior-period information must be presented and financial statements must
be prepared annually.
Both GAAP and IFRS are increasing the use of fair value to report assets. However, at
this point IFRS has adopted it more broadly. As examples, under IFRS companies can
intangible assets.
20 MINUTE QUIZ
Circle the correct answer.
True/False
1. An important purpose of closing entries is to set permanent account balances to zero in
order to begin the next period.
True False
True False
True False
4. The content of the owner’s equity section of a proprietorship is the same as the content
True False
5. Adjustments are journalized and posted only at the end of an accounting period, whereas
True False
6. Current assets are resources that can be converted into cash, but are not expected to be
converted within one year.
True False
7. Long–term liabilities such as lease liabilities, mortgages payable, and bonds payable are
True False
8. The balance of Accumulated Depreciation will appear in the credit side of the worksheet’s
Balance Sheet column.
True False
9. The relationship between current assets and current liabilities is important in evaluating
a company’s liquidity.
True False
substance.
True False
Multiple Choice
1. The worksheet is a type of
a. financial statement.
b. permanent accounting record.
c. working paper.
d. journal.
2. In preparing closing entries, which of the following columns of the worksheet are the
most helpful?
a. The Adjustments column
b. The Adjusted Trial Balance columns
c. The Income Statement columns
d. The Balance Sheet columns
3. The proper sequence for the accounting cycle is
d. journalize, post, close, prepare statements, adjust, analyze.
4. After all the closing entries have been posted, the balance of the income summary will be
d. zero.
5. The post-closing trial balance will
a. be prepared before closing entries are posted to the ledger.
c. contain only balance sheet accounts.
d. contain only income statement accounts.
ANSWERS TO QUIZ
True/False
Multiple Choice