List the four financial statements. Briefly describe each statement.

Short Answer

Expert verified

The four financial statements are income statement, statement of retained earnings, balance sheet, andstatement of cash flows.

Step by step solution

01

Explanation on Income Statement

An income statement is one of the financial statementswhich provide details about the profitability of the company for a particular period. It presents the summary of revenues and expenses for the period. In case expenses are higher than revenue, then it results in loss, and if expenses are lower than revenue, then it results in net income.

02

Explanation on Statement of Retained Earnings

Statement of retained earnings indicates the change in the retained earnings of the company for the period.

03

Explanation on Balance Sheet

Balance sheet is one of the financial statements which reports the assets, liabilities, and owners’ equity of the business as on a particular date.

04

Explanation on Statement of Cash Flows

Statement of cash flows reports transactions which involves cash inflows and outflows. Cash transactions are classified into three categories such as operating, investing, and financing activities.

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Most popular questions from this chapter

Pretty Pictures works weddings and prom-type parties. The balance of Retained Earnings was \(20,000 at December 31, 2017. At December 31, 2018, the business’s accounting records show these balances: Insurance Expense \) 6,000 Accounts Receivable $ 5,000 Cash 42,000 Notes Payable 10,000 Accounts Payable 13,000 Retained Earnings, Dec. 31, 2018 ? Advertising Expense 4,500 Salaries Expense 30,000 Service Revenue 115,000 Equipment 85,500 Dividends 13,000 Common Stock 28,000 Prepare the following financial statements for Pretty Pictures for the year ended December 31, 2018: a. Income statement. b. Statement of retained earnings. c. Balance sheet

Using the information provided, analyze the effects of Lawlor Lawn Service’s transactions on the accounting equation. May 1 Received \(1,700 and issued common stock. May 3 Purchased a mower on account, \)1,440. May 5 Performed lawn services for client on account, \(200. May 17 Paid \)60 cash for gas used in mower. May 28 Paid cash dividends of $300.

Abby Perry recently opened her own law office on December 1, which she operates as a corporation. The name of the new entity is Abby Perry, Attorney. Perry experienced the following events during the organizing phase of the new business and its first month of operation, December 2018. Some of the events were personal and did not affect the law practice. Others were business transactions and should be accounted for by the business. Dec. 1 Sold personal investment in Nike stock, which she had owned for several years, receiving \(30,000 cash. 2 Deposited the \)30,000 cash from the sale of the Nike stock in her personal bank account. 3 Deposited \(89,000 cash in a new business bank account titled Abby Perry, Attorney. The business issued common stock to Perry. 5 Paid \)600 cash for ink cartridges for the printer. 7 Purchased computer for the law office, agreeing to pay the account, \(8,000, within three months. 9 Received \)2,900 cash from customers for services rendered. 15 Received bill from The Lawyer for magazine subscription, \(300. (Use Miscellaneous Expense account.) 23 Finished court hearings on behalf of a client and submitted a bill for legal services, \)8,000, on account. 28 Paid bill from The Lawyer. 30 Paid utilities, \(900. 31 Received \)2,800 cash from clients billed on Dec. 23. 31 Cash dividends of $3,000 were paid to stockholders. Requirements 1. Analyze the effects of the preceding events on the accounting equation of Abby Perry, Attorney. Use a format similar to Exhibit 1-6. 2. Prepare the following financial statements: a. Income statement. b. Statement of retained earnings. c. Balance sheet. d. Statement of cash flows

Using the following information, calculate the return on assets. Net income for November, 2018 $ 5,000 Total assets, November 1, 2018 76,000 Total assets, November 30, 2018 80,250

Canyon Canoe Company is a service-based company that rents canoes for use on local lakes and rivers. Amber and Zack Wilson graduated from college about 10 years ago. They both worked for one of the “Big Four” accounting firms and became CPAs. Because they both love the outdoors, they decided to begin a new business that will combine their love of outdoor activities with their business knowledge. Amber and Zack decide that they will create a new corporation, Canyon Canoe Company, or CCC for short. The business began operations on November 1, 2018. Nov. 1 Received \(16,000 cash to begin the company and issued common stock to Amber and Zack. 2 Signed a lease for a building and paid \)1,200 for the first month’s rent. 3 Purchased canoes for \(4,800 on account. 4 Purchased office supplies on account, \)750. 7 Earned \(1,400 cash for rental of canoes. 13 Paid \)1,500 cash for wages. 15 Paid \(50 dividends to stockholders. 16 Received a bill for \)150 for utilities. (Use separate payable account.) 20 Received a bill for \(175 for cell phone expenses. (Use separate payable account.) 22 Rented canoes to Early Start Daycare on account, \)3,000. 26 Paid \(1,000 on account related to the November 3, 2018, purchase. 28 Received \)750 from Early Start Daycare for canoe rental on November 22, 2018. 30 Paid $100 dividends to stockholders. Requirements 4. Prepare the balance sheet as of November 30, 2018.

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