Chapter 1, Problem 1.9BE

(a)

To determine

Common Stock:

Common stock refers to a security signifying ownership in a corporation. Common stock comprises of equity capital of the company that is never paid back, and is lost if the company closes down. Voting share and ordinary shares are common terms associated with common stock. Common stock gives the right to stockholders to vote on corporate issues. They also come with pre-emptive rights, according to which the shareholder of a common stock is given the right to first refusal.

Dividends:

Dividends are the retained earnings of a business. Dividend refers to the amount paid by a business to its shareholders from the profit earned. As it is paid from the profit to the shareholders, it automatically becomes a part of shareholders’ equity. However, if the dividends are not paid, then it becomes a liability under the account, dividends payable.

Expenses:

Expenses are a kind of cost associated with the assets that may incur while performing a service or delivering a product, in order to generate revenues. It decreases the value of assets, as it is paid directly from it, thereby decreasing the stockholders' equity. There are different types of expenses like supply expense, rent expense, interest expense, and operating expense.

Revenues:

Revenue represents the total amount earned by a business from its sales and other sources, during a particular period of time. The total revenue of a firm can be determined as the selling price of the good or service of the company times the number of quantities sold.

Stockholders’ equity:

The amount invested to a business by its shareholder or the donated capital and earnings from operations less any dividends issued gives the stockholders’ equity. The stockholders’ equity gives the ownership claim on the total assets of a business. The amount left after satisfying the creditors, belongs to the stockholders’ claim on the assets. It also includes common stock and retained earnings.

Whether cash received for services performed is a common stock (C), dividends (D), revenue (R), expense (E), or not affecting stockholders' equity (NSE).

(b)

To determine

Whethercash paid to purchase equipment is a common stock (C), dividends (D), revenue (R), expense (E), or not affecting stockholders' equity (NSE).

(c)

To determine

Whetherpayment made to employees is a common stock (C), dividends (D), revenue (R), expense (E), or not affecting stockholders' equity (NSE).