Question

1 Identify the correct components of the income statement.

revenues, losses, expenses, and gains

assets, liabilities, and owner’s equity

revenues, expenses, investments by owners, distributions to owners

assets, liabilities, and dividends

2. The balance sheet lists which of the following?

assets, liabilities, and owners’ equity

revenues, expenses, gains, and losses

assets, liabilities, and investments by owners

revenues, expenses, gains, and distributions to owners

3. The accounting equation is expressed as ________.

Assets + Liabilities = Owner’s Equity

Assets – Noncurrent Assets = Liabilities

Assets = Liabilities + Investments by Owners

Assets = Liabilities + Owner’s Equity

4. Which of the following is not an element of the financial statements?

future potential sales price of inventory

assets

liabilities

equity

5. Which of the following is the correct order of preparing the financial statements?

income statement, statement of cash flows, balance sheet, statement of owner’s equity

income statement, statement of owner’s equity, balance sheet, statement of cash flows

income statement, balance sheet, statement of owner’s equity, statement of cash flows

income statement, balance sheet, statement of cash flows, statement of owner’s equity

Answer 1

The income statement includes revenues, expenses, gains, and losses. The balance sheet details assets, liabilities, and owner's equity. The accounting equation is Assets = Liabilities + Owner's Equity, ensuring the balance sheet is balanced.

Step-by-step explanation:

1. The correct components of the income statement are revenues, expenses, gains, and losses. These elements capture the financial performance of a company over a specified period.

2. The balance sheet lists assets, liabilities, and owner’s equity. It provides a snapshot of a company's financial position at a specific point in time, representing what the company owns, owes, and the equity amount belonging to the owners.

3. The accounting equation is expressed as Assets = Liabilities + Owner’s Equity. This fundamental equation ensures that a company's balance sheet is balanced, reflecting that all assets are financed by borrowing money or using the owner's funds.

4. An element that is not part of the financial statements is the future potential sales price of inventory. Financial statements are historical and account for the value at the point of reporting, not in the future.

5. The correct order of preparing financial statements is income statement, statement of owner’s equity, balance sheet, and then the statement of cash flows. This sequence allows each statement to utilize information from the preceding statement.

Answer 2

• 1. The correct components of the income statement are revenues, expenses, investments by owners, distributions to owners. The answer is option 4
• 2. The balance sheet lists assets, liabilities, and owners' equity. The answer is option 1
• 3. The accounting equation is expressed as Assets = Liabilities + Owner's Equity. The answer is option 1
• 4. The future potential sales price of inventory is not an element of the financial statements. The answer is option 1
• 5. The correct order of preparing the financial statements is income statement, balance sheet, statement of cash flows, and statement of owner's equity.The answer is option 4

Step-by-step explanation:

A bank's balance sheet lists the assets and liabilities of the bank. Assets are things of value that the bank owns, such as cash, loans, and securities. Liabilities are the debts or obligations that the bank owes to others, such as deposits. The net worth of the bank is the assets minus the liabilities. It is important to note that assets are always equal to liabilities plus net worth.

The accurate components of the income statement are revenues, expenses, gains, and losses. The balance sheet includes assets, liabilities, and owner's equity. The accounting equation is expressed as Assets = Liabilities + Owner's Equity. The correct order of preparing financial statements is income statement, statement of owner's equity, balance sheet, and statement of cash flows. The future potential sales price of inventory is not part of the financial statements.

The answer to the questions 1,2,3,4 and 5 are option 4,1,1,1 and 4 respectively.