Question

Which of the following statements is true?

a. The Balance Sheet reports revenues earned and expenses incurred by the company.
b. Accounts payable and notes payable are reported on the income statement.
c. The three basic elements of the balance sheet are assets, revenues, and expenses.
d. Retained Earnings is part of the stockholders' equity section of the balance sheet.

Answer 1

Retained Earnings is part of the stockholders' equity section of the balance sheet, which includes assets, liabilities, and equity. Revenues and expenses appear on the income statement, not the balance sheet.

Step-by-step explanation:

The correct statement among the ones presented is "d. Retained Earnings is part of the stockholders' equity section of the balance sheet." This statement accurately represents the composition of a balance sheet. The balance sheet is a financial statement that provides a snapshot of a company's financial position at a specific point in time. It includes three main components: assets, liabilities, and stockholders' equity. The stockholders' equity section indeed includes Retained Earnings, which is the amount of net income left over after dividends have been paid to shareholders. In contrast, revenues and expenses are reported on another financial statement known as the income statement, and accounts payable and notes payable are types of liabilities reported on the balance sheet.