Chapter 1, Problem 1.1BYP

(a)

To determine

Introduction:

A financial statement is the complete record of financial transactions that take place in a Company Tt a particular period of time. It provides important financial information like assets, liabilities, revenues and expenses of the company to its internal and external users. It helps them to know the exact financial position of the company. There are four basic financial statements; they are:

• The income statement: This is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned and expenses incurred by the company over a specific period of time. An income statement is also known as an operations statement, an earnings statement, a revenue statement, or a profit and loss statement. The net income is the excess of revenue over expenses.
• The retained earnings statement: This is a financial statement that shows the amount of net income retained by a Company Tt a particular point of time for reinvestment and pays its debts and obligations. It shows the amount of retained earnings that is not paid as dividends to shareholders.
• The balance sheet: This is a financial statement that shows the assets, liabilities, and stockholders’ equity of a Company Tt a particular point of time. It reveals the financial health of a company. Thus, this statement is also called as the Statement of Financial Position. It helps the users to know about the creditworthiness of a Company Ts to whether the company has enough assets to pay off its liabilities.
• Statement of cash flows: This is a financial statement that shows the cash and cash equivalents of a company for a particular period of time. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financial activities of a company.

Annual Report: It is a comprehensive financial report that shows all the business activities that takes place throughout the previous financial year. Its purpose is to provide the complete financial information of a company’s financial activities to its users in order to help them analyze and take well informed decisions.

To determine: Company T’s total assets at December 31, 2011 and 2010.

(b)

To determine

Company T’s cash and cash equivalents on December 31, 2011.

(c)

To determine

Company T’s accounts payable on December 31, 2011 and 2010.

(d)

To determine

Company T’s net sales in 2010, and 2011.

(e)

To determine

Amount change in the net income of Company T from 2010 to 2011.