Chapter 1, Problem 12QS

To determine

Financial statement: Financial statement are the part of final accounts of the company. The primary books of accounts like journal, ledgers are not presentable in front of users that’s why the accountant of the company will prepare financial statement. The financial statement only records the quantitative information instead of qualitative one.

Income statement (I): It includes the information of net income earn or net loss suffered by the company. The expenses deducting from revenue and the resultant is net income or loss to the company. This is informative report that help the user of financial information to take decision.

Balance sheet (B): It is part of the Financial Statement of a Company, which shows the financial position of the company as from where the company receive the money (assets) and to whom the company has to pay. (liabilities and shareholders').While purchase a share in the company the investor will firstly see the balance sheet of the respective company than only decide whether purchase the share or not.

Statement of retained earnings (E): It is the part of financial statement of the company, that contained information related to retained earnings. Retained earnings is the amount that a company wants to keep aside for internal usage of company.

Statement of cash flows(CF): Cash flow statement shows the changes in cash. When there is any change in the balance sheet, that will be shown in cash flow statement. The cash flow statement record the changes in cash terms, means only cash transaction are account for. Non cash transaction is not record in the cash flow statement.

To identify: Item that are either an income statement (I), balance sheet (B), statement of retained earnings (E), statement of cash flows (CF)