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QUESTION 1 The purpose of the statement of retained earnings is to stay in balance. True False QUESTION 2 The timeframe of an
The income statement is the first financial statement prepared and the timeframe is over a period of time. bd O True False QU
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Answer #1

1) Ans - False

The purpouse of retained earnings is not to stay in balance. It is to show how much fund is available for the expansion of the business or to pay dividends to the share holders.

2) Ans - True

The income statement is prepared for a certain accounting period. It is a summary of financial transactions occured from the beginning to the end of the accounting period.

3) Ans - True

Order of preparing financial statements is income statement, statement of retained earnings, balance sheet and cashflow statement.

4) Ans - False

Trial balance is the origin from where the income statement is prepared. It is the list of all the debit and credit balances of all ledgers that totals to an equal amount. Unadjusted trial balance is prepared before any adjusting entries are made to the balances to create financial statements. The unadjusted trial balance is used as the starting point to prepare the adjusted trial balance from which all the other financial statement are prepared.

5) Ans - False

Unadjusted trial balance is a part of accounting process. In fact it is not a financial statement it is the starting point to prepare all the other financial statements.

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