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Business Accounting HORNGREN'S FINANCIAL & MANGERIAL ACCOUNT

(1) To interpret : If the equity of the company increased or decreased over the period. Introduction: The financial statements of a company include the balance sheet , income statement, and cash flow statement. All these statements help the internal and external users of financial statements help in analyzing and concluding the financial position of the respective company. Accounting equation has been stated below: Total assets = Total liabilities + Total shareholders’ equity Now, rearranging the equation, equity can be computed as: Total shareholders’ equity = Total assets − Total liabilities Substituting the values for the beginning of the year, Total shareholders’ equity = $19,000 - $14,000 Total shareholders’ equity = $5,000 Substituting the values for the end of the year, Total shareholders’ equity = $12,000 - $9,000 Total shareholders’ equity = $3,000 The difference in amount can be computed as: Total shareholders’ equity beginning of year - Total shareholders’ equity end of year Substituting the values, $5,000 - $3,000 $2,000 The shareholders’ equity at beginning of the period is more than the shareholders’ equity at the end of the year by $2,000. (2) To interpret : The change in shareholders’ equity. Introduction: The financial statements of a company include the balance sheet, income statement, and cash flow statement. All these statements help the internal and external users of financial statements help in analyzing and concluding the financial position of the respective company. The four possible reasons for the change in the shareholders’ equity could be: Decrease in revenue Increase in expenses Increase in dividend Buyback of common stock

(1) To interpret : If the equity of the company increased or decreased over the period. Introduction: The financial statements of a company include the balance sheet , income statement, and cash flow statement. All these statements help the internal and external users of financial statements help in analyzing and concluding the financial position of the respective company. Accounting equation has been stated below: Total assets = Total liabilities + Total shareholders’ equity Now, rearranging the equation, equity can be computed as: Total shareholders’ equity = Total assets − Total liabilities Substituting the values for the beginning of the year, Total shareholders’ equity = $19,000 - $14,000 Total shareholders’ equity = $5,000 Substituting the values for the end of the year, Total shareholders’ equity = $12,000 - $9,000 Total shareholders’ equity = $3,000 The difference in amount can be computed as: Total shareholders’ equity beginning of year - Total shareholders’ equity end of year Substituting the values, $5,000 - $3,000 $2,000 The shareholders’ equity at beginning of the period is more than the shareholders’ equity at the end of the year by $2,000. (2) To interpret : The change in shareholders’ equity. Introduction: The financial statements of a company include the balance sheet, income statement, and cash flow statement. All these statements help the internal and external users of financial statements help in analyzing and concluding the financial position of the respective company. The four possible reasons for the change in the shareholders’ equity could be: Decrease in revenue Increase in expenses Increase in dividend Buyback of common stock

Solution Summary: The author explains that the financial statements of a company include the balance sheet, income statement, and cash flow statement.

HORNGREN'S FINANCIAL & MANGERIAL ACCOUNT

HORNGREN'S FINANCIAL & MANGERIAL ACCOUNT

7th Edition

ISBN: 9780136505273

Author: MILLER-NOBLES

Publisher: PEARSON

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Chapter 1, Problem 1.21E

Chapter 1, Problem 1.23E

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HORNGREN'S FINANCIAL & MANGERIAL ACCOUNT

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