Chapter 1, Problem 1.3AP

(a)

To determine

Financial Statements: A financial statement is a complete record of the financial transactions of a company at a particular point of time. It provides important financial information like assets, liabilities, revenues and expenses of the company to its internal and external users. 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.
• The retained earnings statement: This is a financial statement that shows the amount of the net income retained by a company at a particular point of time for reinvestment and pays its debts and obligations.
• The balance sheet: This is a financial statement that shows the available assets (owner’s equity and outsider’s equity) and owed liabilities from investing and financial activities of a company. The main components of balance sheet are assets, liabilities, and stockholders’ equity.
• Statement of cash flows: This is a financial statement that determines the net changes in cash through reporting the sources and uses of cash due to operating, investing, and financial activities of a company.

To prepare: The income statement, retained earnings statement, and the balance sheet of NF School for the month of May, 2015

(b)

To determine

To prepare: The income statement and the retained earnings statement of NF School for the month of May, 2015