Chapter 1, Problem 1.2DIR

To determine

Introduction:

Assets: Assets are those items that provide value for money and future economic benefit for an organization. Assets of an organization may be in these two forms: Tangible or intangible form. Examples: Cash, Short-term investments, Inventories, Accounts receivable, Equipment, Supplies and Goodwill.

Liabilities: Liabilities are obligations of the business. These are the claims against the resources that a business owes to outsiders of the company. Liabilities may be Current liabilities, and Long-term liabilities.  Examples: Creditors, Bills payable, Bank overdraft, Salaries and wages payable, and Notes payable.

Stockholders’ equity: Stockholders’ equity is those assets that are invested by the stockholders in a business. It is referred to as the claims of the stockholders on the assets of the business. It consists of two parts: Common stock and Retained earnings.

Expenses: Expenses are the costs that companies borne to produce and sell the goods and services to the customers or clients. Examples: Utilities expense, Salaries expense, advertising expenses.

Revenues: Revenues are the income or earnings that a company receives for delivery of goods and services. Examples: Service revenue, Interest revenue, Fees earned.

Common stock: Common stock is an owners’ claim to the assets of the company.

To Classify: The elements of financial statements.