Download - Few Financial Terminologies
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Week 1
Terminologies
Current Assets: Current assets refer to the assets that enterprise can be realized or utilized within
one year or an operating cycle more than one year.
Cash:Cash includes the final balance of the three accounts: cash on hand, cash in bank, and cash
equivalents, and the monetary fund with special purpose are not included.
Accounts Receivable: Accounts receivable includes the payment should be received for selling
goods, providing services and other business activities.
Other Receivables: This subject accounts for receivable and temporary payment expect for
deposit paid, buy back the sale of financial assets, notes receivable, accounts receivable,
prepayments, Dividend Receivable interest receivable, accounts receivable, subrogation receivable,
accounts receivable reinsurance, reinsurance contract reserve receivable and other receivables.
(Example: Petty cash for traveling)
Prepaid Accounts: This subject shows the advance money paid by firms in accordance with the
contract. In situation of limited advance payment, this subject is not necessary to be set up, and
will the credited directly to the "accounts payable" item.
Inventory: inventory refers to finished goods or commodities, products in the production process,
materials used in the production processor the provision of services held for enterprises held in
daily activities
Deferred Expenses: deferred expense is the expense already paid but should be shared by the
current and future periods, such as low value consumable amortization, a large amount of
lump-sum property insurance fees, sewage charges, technology transfer fees, advertising fees,
fixed assets repairmen fees and prepayment for the rental of the fixed assets.
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Non-current Assets: non-current assets refer to the assets other than current assets.
Long term investment: Long-term Investments refers to the investment that does not meet the
conditions of short-term investment which is not ready for cycling into cash in a year or an
operating cycle more than one year. Long term investment can be divided into long-term stock
investment, long-term investments in bonds and other long-term investments according to the
nature
(Example: Inject equity establish subsidiaries; Purchase bonds)
Fixed Assets: fixed assets are a tangible asset that has the following characteristics at the same
time: (1) held for production of goods, providing labor services, rental or business management; (2)
the service life should be more than one accounting year.
(Example: Equipment Plants Automobiles computer equipment factory car Computers)
Intangible Assets and Other Assets: refers to the identifiable non monetary assets which have no
physical substance owned or controlled by enterprises. This account includes the intangible assets
held by the enterprise, including patents, non patented technology, trademark, copyright, the right
to the use of land.
(In the current criterion, goodwill is separated from the five lists of assets, but this course is not
involved in such specific accounting treatment, and it still will be categorized in the concept of
intangible assets.)
Depreciation: depreciation refers to the depreciation of fixed assets within a certain period to
make up for the loss of fixed assets value in accordance with the rate of extraction, or fixed assets
depreciation computed by the depreciation rate according to the uniform provisions of national
economic accounting.
Biological Assets: A biological asset refers to the animal and plant. Biological assets are classified
into consumptive biological assets, the productive biological assets, and public welfare biological
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assets.
Consumptive biological assets refers to the biological assets held for sale in the future, or will be
harvested as agricultural products, including growing field crops, vegetables, timber and livestock.
The productive biological assets refer to the biological assets held for the output, services or rental
of agricultural products, including economic forest, firewood forest, husbandry animal and
draught animals.
The public welfare biological assets refer to the biological assets for the purpose of protection or
environmental protection, including the windbreak and sand fixation forest, forest for soil and
water conservation and water conservation forest.
Financial Assets: financial assets usually refers to the enterprise's cash, bank deposits, other
monetary funds receivables (such as enterprise deposit in other city,bank check deposit, bank
draft deposit, credit card deposit, credit guarantee deposit, Refundable deposits etc.), notes
receivable, accounts receivable, other receivables, loan equity investment, bond investment and
asset formed by financial derivatives.
Fair Value or fair market value / fair price: the voluntary price fixed by both parties that
familiar with the market situation and determined in the even bargain conditions, or the price by
unrelated parties in even bargain under the condition of an asset can be sold or a liability can be
off the price.
Historical Cost / original cost: cash or cash equivalents paid for the asset. Liabilities are those
that will be paid in cash or cash equivalents in the normal business activities.
Financial Statement
in Million Dollars
Assets Liabilities
Current assets Current l iabi l i t ies
Cash 808 Short-term borrowing 1262
Accounts receivable 1180 Accounts payable 688
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Other receivables 21 Other payables 9
Prepaid accounts 221 Deposit received 0
Inventory 527 Other liabilities 1044
Deferred expenses 9 Total current liabilities 3004
Others 290
Non-current assets Noncur rent l iabi l i t ies
Long-term investment 60 Long-term loans payable 1368
Fixed asset 5422 Bond payable 0
Intangible assets and other
assets168 Long term payable 12
Total Assets 8706 Others 793
Shareholer's equity
Capital stock 498
Additional paid-in capital 2002
Surplus reserve 308
Retained earnings 722
Total liabilities and shareholders'
equity8706