Financial Reporting Problem - Essay Example

et, the receivables should then be reported, representing those items on the balance sheet that are expected to yield cash in the near future like the prepaid expenses or the inventory. Further, the money owed to the company by its debtors follows closely, being the total receivables reported for the period, that they will expect to be paid in the near future. To this end, cash and cash equivalents provide the liquid assets of the company and should have therefore have been outlined last in the balance sheet.

The company’s assets are classified based on their liquidity and on whether they provide long term or short-term service to the company. On the aspect of liquidity, it is plausible to note that the least liquid assets have been placed together, including goodwill, long-term investments and deferred tax assets. On the other hand, receivables, which are more liquid are placed in the same class, which details the amounts of cash that the company anticipates to receive from debtors and operating activities of the company.

These are items like the prepaid expenses, the deferred tax assets and inventory. Still, in terms of liquidity, it is notable to state that the most liquid assets have been recognized and placed in the same category in the uppermost part of the balance sheet. In terms of the extent of service anticipated, the company’s assets are also classified in terms of whether they provide long-term usefulness or help the company meet its short-term obligations. In this perspective, it would be important to note that the fixed or non-current assets have been classified in the same way, while the current assets are also placed in the same category.

Cash equivalents are a class of assets on the balance sheet, which represent a category of investments on which the company is able to derive term payments, mostly known as interest. This amount of money paid as interest is calculated as a percentage of the money committed as an investment by the company,