Question

Consider Emily's balance statement:

Emily's supervisor asked her to revise the balance statement. What does she need to revise? Why?

A B
1 Assets FY 2014
2 Accounts Payable $2,000
3 Wages $75,000
4 Taxes Payable $10,000
5 Mortgage Payable $15,000
6 Total $102,000
7
8 Liabilities FY 2014
9 Cash $800
10 Inventories $36,000
11 Investments $25,000
12 Accounts Receivable $61,800
13 Total $122,800
14
15 Balance -$20,800

Answer 1

Emily has mixed up the assets and liabilities. All the cells under “assets” are really liabilities and vice versa.

Step-by-step explanation:

Answer 2

see below

Step-by-step explanation:

A balance sheet is prepared following the accounting principles of assets equal to liabilities plus equity. Assets are left side while equity and liabilities on the other.

Assets are valuable that a business owns. Liabilities refer to the debts or loans of the business. It is what the business owes others. Equity is the owner's contribution to the business.

In this balance sheet, Emily has confused assets and liabilities.

The column labeled as liabilities represents assets. She should change that. This column should be the topmost column. She has interchanged the labels for liabilities and assets. The difference between assets and liabilities should be equity.