WILEY

IFRS EDITION

Prepared by
Coby Harmon
University
1-1
of California, Santa Barbara
Westmont College
 Assessment

Quiz 1 – 5% (week 5)
Quiz 2 – 5% ( week 15)
Group Assignment – 10% (submission :week 11)
Mid Term Test – 30% ( week 10)

Final exam – 50%

1-2
 PREVIEW OF CHAPTER 1

1-3
 CHAPTER

1 Accounting in Action
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
1 Explain what accounting is.
2 Identify the users and uses of accounting.
3 Understand why ethics is a fundamental business concept.
4 Explain accounting standards and measurement principles.
5 Explain the monetary unit assumption and the economic entity
assumption.
6 State the accounting equation, and define its components.
7 Analyze the effects of business transactions on the accounting equation.
8 Understand the five financial statements and how they are prepared.
1-4
 What is Accounting?
Accounting consists of three basic
activities—identifies, records, and communicates the
economic events of an organization to interested
users.

The accounting process includes

the bookkeeping function.

1-5 LO 1
 Who Uses Accounting Data?

INTERNAL
USERS

Illustration 1-2
Questions that internal
users ask

1-6 LO 1
 Who Uses Accounting Data?
Learning
Objective 2
EXTERNAL Identify the
USERS users and uses
of accounting.

Illustration 1-3
Questions that external users ask
1-7 LO 2
 Accounting Standards
Learning
Objective 4
International Accounting Standards Board Explain accounting
standards and the
(IASB) http://www.iasb.org/ measurement
principles.
International Financial
Reporting Standards

Financial Accounting Standards Board

(FASB) http://www.fasb.org/

Generally Accepted Accounting Principles (GAAP)

1-8 LO 4
 Measurement Principles

HISTORICAL COST PRINCIPLE (or cost principle)

dictates that companies record assets at their cost.

FAIR VALUE PRINCIPLE states that assets and liabilities

should be reported at fair value (the price received to sell an
asset or settle a liability).

1-9 LO 4
 Assumptions
Learning
MONETARY UNIT ASSUMPTION Objective 5
Explain the
requires that companies include in the monetary unit
assumption and
accounting records only transaction data that the economic
entity assumption.
can be expressed in terms of money.

ECONOMIC ENTITY ASSUMPTION requires that

activities of the entity be kept separate and distinct from the
activities of its owner and all other economic entities.
 Proprietorship
Forms of Business
 Partnership
Ownership
 Corporation
1-10 LO 5
 Forms of Business Ownership

Proprietorship Partnership Corporation

 Owned by one  Owned by two or  Ownership

person more persons divided into
Owner is often shares
  Often retail and
manager/operator service-type  Separate legal
 Owner receives businesses entity organized
any profits, suffers under corporation
 Generally
any losses, and is law
unlimited
personally liable personal liability  Limited liability
for all debts
 Partnership
agreement

1-11 LO 5
 Forms of Business Ownership

1-12
 Sole Proprietorship
 Advantages
 You're the boss
 It's easy to get started
 You keep all profits. Income from business is taxed as
personal income.
 You can discontinue your business at will.

 Disadvantages
 You assume unlimited liability
 The amount of investment capital you can raise is limited
 You need to be a generalist. Retaining high-caliber
employees is difficult
 The life of the business is dependent on the owner's

1-13
 Partnership
 Advantages
 Two heads are better than one.
 It's easy to get started.
 More investment capital is available.
 Partners pay only personal income tax.
 High-caliber employees can be made partners

 Disadvantages
 Partners have unlimited liability.
 Partners must share all profits.
 The partners may disagree.
 The life of the business is limited.

1-14
 Corporation
 Advantages
 Stockholders have limited liability.
 Corporations can raise the most investment capital.
 Corporations have unlimited life.
 Ownership is easily transferable.
 Corporations utilize specialists.

 Disadvantages
 Starting a corporation is expensive.
 Corporations are closely regulated by government
agencies.

1-15
 The Basic Accounting Equation
Learning
Basic Accounting Equation Objective 6
State the
accounting
 Provides the underlying framework for equation, and
define its
recording and summarizing economic components.
events.

 Assets must equal the sum of liabilities

and equity.

Assets = Liabilities + Equity

1-16 LO 6
 Basic Accounting Equation

Assets = Liabilities + Equity

Liabilities
Assets Equity
 Claims against
 Resources a  Ownership claim
assets (debts and
business owns. on total assets.
obligations).
 Provide future  Referred to as
 Creditors (party to
services or benefits. residual equity.
whom money is
 Cash, Inventory, owed).  Share Capital—
Equipment, etc. Ordinary and
 Accounts
Payable, Notes Retained
Payable, Salaries Earnings.
and Wages
1-17 LO 6
Payable, etc.
 Account Classifications

 To improve understanding, companies group similar

assets and similar liabilities together.

Standard Classifications

1-18
 Asset ( Current Asset & Non-current Asset)

1) Current Assets
 Assets that a company expects to convert to cash or
use up within one year or the operating cycle, whichever
is longer.

 Operating cycle is the average time it takes from the

purchase of inventory to the collection of cash from
customers.

 Examples :

1-19
 Current Assets

1-20
 Non-Current Asset

1) Long-Term Investments
 Investments in ordinary shares and bonds of other
companies.
 Investments in non-current assets such as land or buildings
that a company is not using in its operating activities.

1-21
 Non-Current Asset

2)Property, Plant, and Equipment

 Long useful lives.

 Currently used in operations.

 Depreciation - allocating the cost of assets to a number

of years.

 Accumulated depreciation - total amount of

depreciation expensed thus far in the asset’s life.

 Examples :

1-22
 Property, Plant, and Equipment

1-23
 Non-Current Asset

3)Intangible Assets
 Assets that do not have physical substance.

1-24
 Liabilities
(Current liabilities & Non-current liabilities)

Current Liabilities
 Obligations company is to pay within the coming year or
its operating cycle, whichever is longer.

 Usually list notes payable first, followed by accounts

payable. Other items follow in order of magnitude.

 Liquidity - ability to pay obligations expected to be due

within the next year.

 Examples :
1-25
 Current Liabilities

1-26
 Non-Current Liabilities
 Obligations a company expects to pay after one year.

1-27
 Equity
 Proprietorship - one capital account.

 Partnership - capital account for each partner.

 Company – Share Capital and Retained Earnings.

1-28
 Equity (company) Illustration 1-7
Increases and
decreases in equity

Investments by shareholders represent the total amount paid in

by shareholders for the ordinary shares they purchase.

1-29 LO 6
 Stockholders’ Equity Illustration 1-7
Increases and
decreases in equity

Revenues result from business activities entered into for the

purpose of earning income.
Common sources of revenue are: sales, fees, services,
commissions, interest, dividends, royalties, and rent.

1-30 LO 6
 Stockholders’ Equity Illustration 1-7
Increases and
decreases in equity

Expenses are the cost of assets consumed or services used in

the process of earning revenue.
Common expenses are: salaries expense, rent expense, utilities
expense, property tax expense, etc.

1-31 LO 6
 Stockholders’ Equity Illustration 1-7
Increases and
decreases in equity

Dividends are the distribution of cash or other assets to

shareholders.
Dividends reduce retained earnings. However, dividends are not
expenses.

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 Equity (Small business/Sole proprietorship)

INCREASES DECREASE

Capital Drawing
Equity
Revenue Expenses

Investments by owner represent the total amount of money or

other assets that the owner contributes to the business (Capital)

Owner’s drawing represent the total amount that owner has taken
from the business for personal use.
1-33
 The Basic Accounting Equation
Learning
Transactions are a business’s economic Objective 7
Analyze the
events recorded by accountants. effects of
business
 May be external or internal. transactions on
the accounting
equation.
 Not all activities represent transactions.

 Each transaction has a dual effect on the accounting

equation.

1-34 LO 7
 Transaction Analysis

Illustration: Are the following events recorded in the accounting

records?
Discuss product
Purchase
Event design with Pay rent
computer
potential customer

Criterion Is the financial position (assets, liabilities, or

stockholder’s equity) of the company changed?

Record/
Don’t Record
Illustration 1-8
Transaction-identification
process
1-35 LO 7
 Transaction Analysis (company)

Illustration 1-9
Expanded accounting equation

1-36 LO 7
 Transaction Analysis (small business)

Asset = Liability + Equity

Capital + Net - Drawing

Income

Revenue - Expenses
Expanded accounting equation

1-37
 Transaction Analysis (company)
TRANSACTION 1. INVESTMENT BY STOCKHOLDERS Ray and Barbara
Neal decide to start a smartphone app development company that they
incorporate as Softbyte SA. On September 1, 2017, they invest €15,000
cash in the business in exchange for €15,000 of ordinary shares. The
ordinary shares indicates the ownership interest that the Neals have in
Softbyte SA. This transaction results in an equal increase in both assets
and equity.
Illustration 1-10

Assets = Liabilities + Equity

Trans- Accounts Accounts Share Retained Earnings
Cash + + Supplies + Equipment = + +
action Receivable Payable Capital Rev. – Exp. – Div.

1. +15,000 +15,000

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 TRANSACTION 2. PURCHASE OF EQUIPMENT FOR CASH Softbyte SA
purchases computer equipment for €7,000 cash.
Illustration 1-10

Assets = Liabilities + Equity

Trans- Accounts Accounts Share Retained Earnings
Cash + + Supplies + Equipment = + +
action Receivable Payable Capital Rev. – Exp. – Div.

1. +15,000 +15,000
2. -7,000 +7,000
3. +1,600 +1,600
4. +1,200 +1,200
5. +250 -250
6. +1,500 +2,000 +3,500
7. -1,700 -600
-900
-200
8. -250 -250
9. +600 -600
10. -1,300 -1,300
$8,050 + $1,400 + $1,600 + $7,000 = $1,600 + $15,000 + $4,700 - $1,950 - $1,300
1-39 LO 7
 TRANSACTION 3. PURCHASE OF SUPPLIES ON CREDIT Softbyte SA
purchases for €1,600 headsets and other accessories expected to last
several months. The supplier allows Softbyte to pay this bill in October.
Illustration 1-10 Assets = Liabilities + Equity
Trans- Accounts Accounts Share Retained Earnings
Cash + + Supplies + Equipment = + +
action Receivable Payable Capital Rev. – Exp. – Div.

1. +15,000 +15,000
2. -7,000 +7,000
3. +1,600 +1,600
4. +1,200 +1,200
5. +250 -250
6. +1,500 +2,000 +3,500
7. -1,700 -600
-900
-200
8. -250 -250
9. +600 -600
10. -1,300 -1,300
$8,050 + $1,400 + $1,600 + $7,000 = $1,600 + $15,000 + $4,700 - $1,950 - $1,300
1-40 LO 7
 TRANSACTION 4. SERVICES PERFORMED FOR CASH Softbyte SA
receives €1,200 cash from customers for app development services it has
performed. Illustration 1-10

Assets = Liabilities + Equity

Trans- Accounts Accounts Share Retained Earnings
Cash + + Supplies + Equipment = + +
action Receivable Payable Capital Rev. – Exp. – Div.

1. +15,000 +15,000
2. -7,000 +7,000
3. +1,600 +1,600
4. +1,200 +1,200
5. +250 -250
6. +1,500 +2,000 +3,500
7. -1,700 -600
-900
-200
8. -250 -250
9. +600 -600
10. -1,300 -1,300
$8,050 + $1,400 + $1,600 + $7,000 = $1,600 + $15,000 + $4,700 - $1,950 - $1,300
1-41 LO 7
 TRANSACTION 5. PURCHASE OF ADVERTISING ON CREDIT Softbyte
SA receives a bill for €250 from the Programming News for advertising on
its website but postpones payment until a later date. Illustration 1-10

Assets = Liabilities + Equity

Trans- Accounts Accounts Share Retained Earnings
Cash + + Supplies + Equipment = + +
action Receivable Payable Capital Rev. – Exp. – Div.

1. +15,000 +15,000
2. -7,000 +7,000
3. +1,600 +1,600
4. +1,200 +1,200
5. +250 -250
6. +1,500 +2,000 +3,500
7. -1,700 -600
-900
-200
8. -250 -250
9. +600 -600
10. -1,300 -1,300
$8,050 + $1,400 + $1,600 + $7,000 = $1,600 + $15,000 + $4,700 - $1,950 - $1,300
1-42 LO 7
 TRANSACTION 6. SERVICES PROVIDED FOR CASH AND CREDIT.
Softbyte provides €3,500 of services. The company receives cash of
€1,500 from customers, and it bills the balance of €2,000 on account.
Illustration 1-10 Assets = Liabilities + Equity
Trans- Accounts Accounts Share Retained Earnings
Cash + + Supplies + Equipment = + +
action Receivable Payable Capital Rev. – Exp. – Div.

1. +15,000 +15,000
2. -7,000 +7,000
3. +1,600 +1,600
4. +1,200 +1,200
5. +250 -250
6. +1,500 +2,000 +3,500
7. -1,700 -600
-900
-200
8. -250 -250
9. +600 -600
10. -1,300 -1,300
$8,050 + $1,400 + $1,600 + $7,000 = $1,600 + $15,000 + $4,700 - $1,950 - $1,300
1-43 LO 7
 TRANSACTION 7. PAYMENT OF EXPENSES Softbyte SA pays the
following expenses in cash for September: office rent €600, salaries and
wages of employees €900, and utilities €200. Illustration 1-10

Assets = Liabilities + Equity

Trans- Accounts Accounts Share Retained Earnings
Cash + + Supplies + Equipment = + +
action Receivable Payable Capital Rev. – Exp. – Div.

1. +15,000 +15,000
2. -7,000 +7,000
3. +1,600 +1,600
4. +1,200 +1,200
5. +250 -250
6. +1,500 +2,000 +3,500
7. -1,700 -600
-900
-200
8. -250 -250
9. +600 -600
10. -1,300 -1,300
$8,050 + $1,400 + $1,600 + $7,000 = $1,600 + $15,000 + $4,700 - $1,950 - $1,300
1-44 LO 7
 TRANSACTION 8. PAYMENT OF ACCOUNTS PAYABLE Softbyte SA
pays its €250 Programming News bill in cash. The company previously (in
Transaction 5) recorded the bill as an increase in Accounts Payable.
Illustration 1-10 Assets = Liabilities + Equity
Trans- Accounts Accounts Share Retained Earnings
Cash + + Supplies + Equipment = + +
action Receivable Payable Capital Rev. – Exp. – Div.

1. +15,000 +15,000
2. -7,000 +7,000
3. +1,600 +1,600
4. +1,200 +1,200
5. +250 -250
6. +1,500 +2,000 +3,500
7. -1,700 -600
-900
-200
8. -250 -250
9. +600 -600
10. -1,300 -1,300
$8,050 + $1,400 + $1,600 + $7,000 = $1,600 + $15,000 + $4,700 - $1,950 - $1,300
1-45 LO 7
 TRANSACTION 9. RECEIPT OF CASH ON ACCOUNT Softbyte SA
receives €600 in cash from customers who had been billed for services
(in Transaction 6). Illustration 1-10

Assets = Liabilities + Equity

Trans- Accounts Accounts Share Retained Earnings
Cash + + Supplies + Equipment = + +
action Receivable Payable Capital Rev. – Exp. – Div.

1. +15,000 +15,000
2. -7,000 +7,000
3. +1,600 +1,600
4. +1,200 +1,200
5. +250 -250
6. +1,500 +2,000 +3,500
7. -1,700 -600
-900
-200
8. -250 -250
9. +600 -600
10. -1,300 -1,300
$8,050 + $1,400 + $1,600 + $7,000 = $1,600 + $15,000 + $4,700 - $1,950 - $1,300
1-46 LO 7
 TRANSACTION 10. DIVIDENDS The corporation pays a dividend of
€1,300 in cash to Ray and Barbara Neal, the shareholders of Softbyte SA.
Illustration 1-10
Assets = Liabilities + Equity
Trans- Accounts Accounts Share Retained Earnings
Cash + + Supplies + Equipment = + +
action Receivable Payable Capital Rev. – Exp. – Div.

1. +15,000 +15,000
2. -7,000 +7,000
3. +1,600 +1,600
4. +1,200 +1,200
5. +250 -250
6. +1,500 +2,000 +3,500
7. -1,700 -600
-900
-200
8. -250 -250
9. +600 -600
10. -1,300 -1,300
€8,050 + €1,400 + €1,600 + €7,000 = €1,600 + €15,000 + €4,700 - €1,950 - €1,300

1-47 €18,050 €18,050 LO 7

 Summary of Transactions

1. Each transaction must be analyzed in terms of its

effect on:
a. The three components of the basic accounting
equation.
b. Specific types (kinds) of items within each
component.
2. The two sides of the equation must always be equal.
3. The Share Capital—Ordinary and Retained Earnings
columns indicate the causes of each change in the
shareholders’ claim on assets.

1-48 LO 7
 > DO IT!

Transactions made by Virmari & Co. SA, a public accounting firm, for
the month of August are shown below. Prepare a tabular analysis
which shows the effects of these transactions on the expanded
accounting equation, similar to that shown in Illustration 1-10.

1. The company issued ordinary shares for €25,000 cash.

2. The company purchased €7,000 of office equipment on credit.

3. The company received €8,000 cash in exchange for services

performed.

4. The company paid €850 for this month’s rent.

5. The company paid a dividend of €1,000 in cash to shareholders.

1-49 LO 7
 > DO IT!

1. The company issued ordinary shares for €25,000 cash.

Assets = Liabilities + Equity

Trans- Accounts Share Retained Earnings
Cash + Equipment = + +
action Payable Capital Rev. – Exp. – Div.
1. +25,000 +25,000

2. +7,000 +7,000

3. +8,000 +8,000

4. -850 -850

5. -1,000 -1,000

$31,150 + $7,000 = $7,000 + $25,000 + $8,000 - $850 - $1,000

$18,050 $18,050
1-50 LO 7
 > DO IT!

2. The company purchased €7,000 of office equipment on credit.

Assets = Liabilities + Equity

Trans- Accounts Share Retained Earnings
Cash + Equipment = + +
action Payable Capital Rev. – Exp. – Div.
1. +25,000 +25,000

2. +7,000 +7,000

3. +8,000 +8,000

4. -850 -850

5. -1,000 -1,000

$31,150 + $7,000 = $7,000 + $25,000 + $8,000 - $850 - $1,000

$18,050 $18,050
1-51 LO 7
 > DO IT!

3. The company received €8,000 cash in exchange for services

performed.
Assets = Liabilities + Equity
Trans- Accounts Share Retained Earnings
Cash + Equipment = + +
action Payable Capital Rev. – Exp. – Div.
1. +25,000 +25,000

2. +7,000 +7,000

3. +8,000 +8,000

4. -850 -850

5. -1,000 -1,000

$31,150 + $7,000 = $7,000 + $25,000 + $8,000 - $850 - $1,000

$18,050 $18,050
1-52 LO 7
 > DO IT!

4. The company paid €850 for this month’s rent.

Assets = Liabilities + Equity

Trans- Accounts Share Retained Earnings
Cash + Equipment = + +
action Payable Capital Rev. – Exp. – Div.
1. +25,000 +25,000

2. +7,000 +7,000

3. +8,000 +8,000

4. -850 -850

5. -1,000 -1,000

$31,150 + $7,000 = $7,000 + $25,000 + $8,000 - $850 - $1,000

$18,050 $18,050
1-53 LO 7
 > DO IT!

5. The company paid a dividend of €1,000 in cash to shareholders.

Assets = Liabilities + Equity

Trans- Accounts Share Retained Earnings
Cash + Equipment = + +
action Payable Capital Rev. – Exp. – Div.
1. +25,000 +25,000

2. +7,000 +7,000

3. +8,000 +8,000

4. -850 -850

5. -1,000 -1,000

€31,150 + €7,000 = €7,000 + €25,000 + €8,000 - €850 - €1,000

€38,150 €38,150
1-54 LO 7
 The Basic Accounting Equation
Learning
Companies prepare five financial Objective 8
Understand the
statements : five financial
statements
Income and how they
are prepared.
Statement/ Retained Statement
statement Earnings of Financial
of profit or Statement Position
loss

Statement Comprehensive
of Cash Income
Flows Statement

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 Income Statement / statement of profit or loss (SPL)

 Reports the profitability of the company’s operations

over a specific period of time.

 Lists revenues first, followed by expenses.

 Shows net income (or net loss).

 Does not include investment and dividend

transactions between the shareholders and the
business.

1-56 LO 8
 Retained Earnings Statement

 Reports the changes in retained earnings for a

specific period of time.

 The time period is the same as that covered by the

income statement.

 Information provided indicates the reasons why

retained earnings increased or decreased during the
period.

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 Statement of Financial Position (SOFP)

 Reports the assets, liabilities, and equity at a specific

date.

 Lists assets at the top, followed by liabilities and

equity.

 Total assets must equal total liabilities and equity.

 Is a snapshot of the company’s financial condition at a

specific moment in time (usually the month-end or
year-end).

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 Statement of Cash Flows (Not in syllabus)

 Information on the cash receipts and payments for a

specific period of time.

 Answers the following:

HELPFUL HINT
► Where did cash come from? Investing activities
pertain to investments
► What was cash used for? made by the company,
not investments made
► What was the change in the by the owners.

cash balance?

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 Illustration 1-10
Financial statements and
their interrelationships

Illustration 1-11
1-60
Financial statements and their interrelationships
LO 8
1-61 LO 8
Illustration 1-11
 Balance sheet and
income statement
are needed to
prepare statement of
cash flows.

Illustration 1-11
Financial statements
and their
interrelationships

1-62
LO 8
 > DO IT!

Presented below is selected information related to Flanagan Group plc

at December 31, 2017. Flanagan reports financial information monthly.
Equipment £10,000 Utilities Expense £ 4,000
Cash 8,000 Accounts Receivable 9,000
Service Revenue 36,000 Salaries and Wages Expense 7,000
Rent Expense 11,000 Notes Payable 16,500
Accounts Payable 2,000 Dividends 5,000
(a) Determine the total assets of Flanagan at December 31, 2017.
(b) Determine the net income that Flanagan reported for December
2017.
(c) Determine the equity of Flanagan at December 31, 2017.

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 Information related to Flanagan Group plc at December 31, 2017.
Equipment £10,000 Utilities Expense £ 4,000
Cash 8,000 Accounts Receivable 9,000
Service Revenue 36,000 Salaries and Wages Expense 7,000
Rent Expense 11,000 Notes Payable 16,500
Accounts Payable 2,000 Dividends 5,000
(a) Determine the total assets of Flanagan at December 31, 2017.

Equipment £10,000
Cash 8,000
Accounts Receivable 9,000
Total assets £27,000

1-64 LO 8
 Information related to Flanagan Group plc at December 31, 2017.
Equipment £10,000 Utilities Expense £ 4,000
Cash 8,000 Accounts Receivable 9,000
Service Revenue 36,000 Salaries and Wages Expense 7,000
Rent Expense 11,000 Notes Payable 16,500
Accounts Payable 2,000 Dividends 5,000
(b) Determine the net income reported for December 2017.
Revenues
Service revenue £36,000
Expenses
Rent expense £11,000
Salaries and wages expense 7,000
Utilities expense 4,000
Total expenses 22,000
Net income £14,000
1-65 LO 8
 Information related to Flanagan Group plc at December 31, 2017.
Equipment £10,000 Utilities Expense £ 4,000
Cash 8,000 Accounts Receivable 9,000
Service Revenue 36,000 Salaries and Wages Expense 7,000
Rent Expense 11,000 Notes Payable 16,500
Accounts Payable 2,000 Dividends 5,000
(c) Determine the equity of Flanagan at December 31, 2017.

Total assets [as computed in (a)] £27,000

Less: Liabilities
Notes payable £16,500
Accounts payable 2,000 18,500
Equity £ 8,500

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 Review Questions

1-67
 Assumptions

Review Question
Which of the following is not a step in the accounting
process?
a. Identification.
b. Recording.
c. Economic entity.
d. Communication

1-68 LO 1
 > DO IT!
Indicate whether the following statements are true or false.

1. The three steps in the accounting process are identification,

recording, and communication.

2. Bookkeeping encompasses all steps in the accounting process.

3. Accountants prepare, but do not interpret, financial reports.

4. The two most common types of external users are investors and
company officers.

5. Managerial accounting activities focus on reports for internal

users.

Solution: 1. True 2. False 3. False 4. False 5. True

1-69 LO 2
 > DO IT!

Classify the following items as issuance of stock, dividends,

revenues, or expenses. Then indicate whether each item
increases or decreases stockholders’ equity.

Classification Effect on Equity

1. Rent Expense Expense Decrease

2. Service Revenue Revenue Increase

3. Dividends Dividends Decrease

4. Salaries and Wages

Expense Decrease
Expense

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 Financial Statements

Review Question
Net income will result during a time period when:

a. assets exceed liabilities.

b. assets exceed revenues.

c. expenses exceed revenues.

d. revenues exceed expenses.

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 Financial Statements

Review Question
The financial statement that reports assets, liabilities, and
equity is the:

a. income statement.

b. retained earnings statement.

c. statement of financial position.

d. statement of cash flows.

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