Chapter 1, Problem 1.11BE

(a)

To determine

Financial Statements:

A financial statement is a complete record of the financial transactions that takes place in a company at a particular point of time. It provides important financial information like assets, liabilities, revenues and expenses of the company to its internal and external users. It helps them to know the exact financial position of the company. There are four basic financial statements, they are:

• The income statement: This is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned and expenses incurred by the company over a specific period of time. Income statement is also known as operations statement, earnings statement, revenue statement, or profit and loss statement. The net income is the excess of revenue over expenses.
• The retained earnings statement: This is a financial statement that shows the amount of the net income retained by a company at a particular point of time for reinvestment and pays its debts and obligations. It shows the amount of retained earnings that is not paid as dividends to the shareholders.
• The balance sheet: This is a financial statement that shows the available assets (owner’s equity and outsider’s equity) and owed liabilities from investing and financial activities of a company. This statement reveals the financial health of company. So, this statement is also called as Statement of Financial Position. It helps the users to know the creditworthiness of a company as to whether the company has enough assets to pay off its liabilities. The main components of balance sheet are assets, liabilities, and stockholders’ equity.
• Statement of cash flows: This is a financial statement that shows the cash and cash equivalents of a company for a particular period of time. It determines the net changes in cash through reporting the sources and uses of cash due to operating, investing, and financial activities of a company.

To ascertain: Whether notes payable appear on the income statement (IS), balance sheet (BS), or retained earnings statement (RE).

(b)

To determine

To ascertain: Whether advertising expenses appear on the income statement (IS), balance sheet (BS), or retained earnings statement (RE).

(c)

To determine

To ascertain: Whether common stock appears on the income statement (IS), balance sheet (BS), or retained earnings statement (RE).

(d)

To determine

To ascertain: Whether cash appears on the income statement (IS), balance sheet (BS), or retained earnings statement (RE).

(e)

To determine

To ascertain: Whether service revenue appears on the income statement (IS), balance sheet (BS), or retained earnings statement (RE).

(f)

To determine

To ascertain: Whether dividends appear on the income statement (IS), balance sheet (BS), or retained earnings statement (RE).