Chapter 1, Problem 19Q

To determine

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. Income statement is also known as operations statement, earnings statement, revenue statement, or profit and loss statement. The net income is the excess of revenue over expenses.

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. It shows the amount of retained earnings that is not paid as dividends to the shareholders.

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. This statement reveals the financial health of company. So, this statement is also called as Statement of Financial Position. It helps the users to know the creditworthiness of a company as to whether the company has enough assets to pay off its liabilities. The main components of balance sheet are assets, liabilities, and stockholders’ equity.

To ascertain: Whether a company's net income appears directly on the income statement and the retained earnings statement, and included indirectly in the company's balance sheet.