Wk1 Team Reflection Acc/422
Learning Team A Week One Reflection
ACC/422
Monday, April 8, 2013
Lisa A. Foy
Learning Team A Week One Reflection
The object of the reflection for this week is to discuss the objectives for Week One and their relation to the importance of the balance sheet to internal and external users. The objectives discussed by Learning Team A are the components of cash and cash equivalents, and the comparison and contrast of different inventory cost flow assumptions and how they are valued. The internal users are indentified as management and the external users are investors and creditors.
Cash and Cash Equivalents
Cash is defined in the text as the “most liquid of assets” and is identified by companies as a current asset. (Weygandt, Kimmel, & Kieso, 2010) What has become very popular is the classification called cash and cash equivalents. FASB has determined that classification to be misleading and it will probably be eliminated from financial statements. Cash will be cash and what used to be short term cash equivalents will now be reported as temporary investments. One of the situations leading to this decision is some companies having to take large losses on auction-rated notes. These notes are liquid because they can be traded daily, but they are not short term because the terms of the notes can be lengthy, in some cases 30 years. When the economy went bad, the auctions stopped, the value went away and the companies participating had to take sizeable losses.
Why inventory is important on the Balance Sheet Inventory is an important aspect on the balance sheet. When an outsider studies the balance sheet, they have to look at the assets that the company currently has to make the inventory portion of the balance sheet make sense. The reason that the inventory shows on the balance sheet as a current asset is so outsider investors assume the inventory sells in the future when the product is complete. When investors review the balance sheet, they also like to
ACC/422
Monday, April 8, 2013
Lisa A. Foy
Learning Team A Week One Reflection
The object of the reflection for this week is to discuss the objectives for Week One and their relation to the importance of the balance sheet to internal and external users. The objectives discussed by Learning Team A are the components of cash and cash equivalents, and the comparison and contrast of different inventory cost flow assumptions and how they are valued. The internal users are indentified as management and the external users are investors and creditors.
Cash and Cash Equivalents
Cash is defined in the text as the “most liquid of assets” and is identified by companies as a current asset. (Weygandt, Kimmel, & Kieso, 2010) What has become very popular is the classification called cash and cash equivalents. FASB has determined that classification to be misleading and it will probably be eliminated from financial statements. Cash will be cash and what used to be short term cash equivalents will now be reported as temporary investments. One of the situations leading to this decision is some companies having to take large losses on auction-rated notes. These notes are liquid because they can be traded daily, but they are not short term because the terms of the notes can be lengthy, in some cases 30 years. When the economy went bad, the auctions stopped, the value went away and the companies participating had to take sizeable losses.
Why inventory is important on the Balance Sheet Inventory is an important aspect on the balance sheet. When an outsider studies the balance sheet, they have to look at the assets that the company currently has to make the inventory portion of the balance sheet make sense. The reason that the inventory shows on the balance sheet as a current asset is so outsider investors assume the inventory sells in the future when the product is complete. When investors review the balance sheet, they also like to