Current Assets Essay
On the international level, the form of a balance sheet is not strictly prescribed by the legislation. The economic entities can design the exact form of their own balance sheet. The only thing prescribed by legislation is to obey the basic accounting principles. However, typical items can be found: ASSETS I. Current Assets I.1. Cash Any medium of exchange that a bank will accept at face value: cash, bank deposits, currency, checks. Check: a written instrument signed by the depositor (drawer), ordering the bank (drawee) to pay a certain sum of money to the order of a designated person (payee).
“Checks” presented in the balance sheet refer to demands on money (the examined entity is the payee) Cash is presented at FACE VALUE. I.2. Marketable securities (temporary investments) When a company has excess cash that is not needed immediately, it may put it into income-yielding investments, which can be quickly and easily converted into cash. Temporary investments in securities include stocks (shares) and bonds (will be detailed later) Marketable securities should be presented at HISTORICAL COST. The gain or loss originating from the difference between the market price and the historical cost (also called as book value) remains unrealized until the securities are sold.
I.3. Receivables Receivables include all money claims against people,
Need essay sample on "Current Assets "? We will write a custom essay sample specifically for you for only $ 13.90/page
Face value of the note + Interest on the note = Maturity value The interest rate is usually stated as yearly interest. The calculation of interest on a given time interval: Principal Interest Rate Time =Interest Example. Our firm accepted a note instead of a $ 3,000 payment on 1 March. The term of the note is 90 days, the interest rate is 12%. (1 year = 360 days) What is the maturity value?
Face value $ 3,000 + Interest $ 90 (3,000*0,12*90/360) = Maturity value $ 3,090 Example. We have a 60-days note with maturity value of $ 2,244. Interest rate is 12%. Determine the face value. The interest contained by the maturity value is 12%*60*360= 2%. Face value = $ 2,244 / 1,02 = $ 2,200 Discounting Notes If the holder (payee) of the note needs cash immediately, he can sell the note to a bank at a discounted price.