Question

5. Complete the following statements: Resources of the company are: Debts and obligations of the company are: Owners' claims to company resources are: The costs of providing goods & services are: Amounts earned for selling goods & services are: Cash distributions to stockholders are: The difference between revenues & expenses is: 6. Financial statements are prepared in the follow order: - an

Answer 1

5.

a) Resources of the company are Assets

Assets are the resources of the company employed to earn economic benefits

b) Debts and obligations of the company are Liabilities

Debts and obligations are the liabilities which are to repaid at some point of time as agreed while borrowing funds

c) Owner's claims to company resources are Stockholder's Equity

Stockholder's Equity is the portion which represents owner's claims to company resources. It includes paid up capital and retained earnings

d) The cost of providing goods and services are Cost of goods sold

Cost of goods sold consists the expenses incurred directly to provide goods and services

e) Amounts earned for selling goods and services are Sales Revenue

Sales Revenue is the amount earned by selling goods and services

f) Cash distribution to stockholders are Dividends

When cash is distributed to stockholders it is termed as payment of Dividends to stockholders

g) The difference between revenue & expenses is Profit / Net Income

Profit / Net Income is the excess of revenue earned over the expenses incurred for it

6.

Financial statements are prepared in the following order

1. Income Statement

2. Statement of Retained Earnings / Statement Of Changes In Equity

3. Balance sheet / Statement of Financial position

4. Statement of Cash flows

First Income statement is prepared, so that profit is calculated. Profit is then transferred to retained earnings and balance sheet is prepared. Statement of cash flows is prepared at the end considering all previous 3 statements made.