Chapter 1, Problem 18Q

To determine

Cash:

Cash represents legal tender or coins used to exchange goods or services and debt. Cash also includes the value of assets, which can be further converted into cash, as recorded by a business entity. It is also called money, in its physical form. It mainly includes bank accounts. Marketable securities like government bonds also come under cash. Though cash usually means money in hand, it can also be used to refer to money available in bank accounts, in the form of checks or in other forms of currency.

Revenues:

Revenue represents the total amount earned by a business from its sales and other sources, during a particular period of time. The total revenue of a firm can be determined as the selling price of the good or service of the company times the number of quantities sold.

Stockholders’ equity

The amount invested to a business by its shareholder or the donated capital and earnings from operations less any dividends issued gives the stockholders’ equity. The stockholders’ equity gives the ownership claim on the total assets of a business. The amount left after satisfying the creditors, belongs to the stockholders’ claim on the assets. It also includes common stock and retained earnings.

To ascertain: Whether the recording of the receipt of an additional investment as an increase in cash and revenues is an appropriate treatment.