You might think that Microsoft would have most of its resources tied up in plant assets. In fact, the company's balance sheet recently reported property and equipment of $2.4 billion. The same balance sheet, however, shows total assets of nearly $72 billion. Thus, property and equipment comprise only 3.3 percent of Microsoft's total assets.
Financial assets of $46 billion account for 64 percent of Microsoft 's total assets. Financial assets are a company's most liquid resources. They include cash, cash equivalents, certain investments in marketable securities, accounts receivable, and notes receivable.
AFTER STUDYING THIS CHAPTER, YOU SHOULD BE ABLE TO:
Define financial assets and explain their valuation in the balance sheet. |
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Describe the objectives of cash management and internal controls over cash. |
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Prepare a bank reconciliation and explain its purpose. |
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Describe how short-term investments are reported in the balance sheet and account for transactions involving marketable securities. |
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Account for uncollectible receivables using the allowance and direct write-off methods. |
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Explain, compute, and account for notes receivable and interest revenue. |
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Evaluate the liquidity of a company's accounts receivable. |