Corporate Financial Statements Flashcards
7 cards from real CSC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Corporate Financial Statements flashcards as text
Under accrual accounting, revenue is recognized when:
Answer: The performance obligation is satisfied, regardless of cash receipt
Under IFRS 15 and accrual accounting, revenue is recognized when (or as) a performance obligation is satisfied, not necessarily when cash is received.
A deferred revenue balance on a balance sheet indicates that a company has:
Answer: Collected cash for services not yet performed
Deferred revenue (unearned revenue) is a liability representing cash received before the company has fulfilled its obligation to the customer.
Which depreciation method results in the highest depreciation expense in the early years of an asset's life?
Answer: Double-declining balance method
The double-declining balance method is an accelerated depreciation method that applies twice the straight-line rate to the asset's book value, producing higher expense in early years.
Which item would appear in the investing activities section of the cash flow statement?
Answer: Purchase of a manufacturing plant
Purchasing property, plant, and equipment (PP&E) is a capital expenditure and is classified as an investing activity in the cash flow statement.
What does a company's EBITDA measure?
Answer: Earnings before interest, taxes, depreciation, and amortization
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization, commonly used as a proxy for operating cash generation.
If a company's current ratio is 2.5 and current liabilities are $200,000, what are its current assets?
Answer: $500,000
Current ratio = Current assets ÷ Current liabilities; therefore Current assets = 2.5 × $200,000 = $500,000.
Which note disclosure is typically required in Canadian corporate financial statements regarding significant accounting policies?
Answer: The basis of presentation and key accounting policies applied
Companies must disclose their significant accounting policies (e.g., revenue recognition, depreciation methods, inventory valuation) in the notes to financial statements.