Chapter 16, Problem 16.5BE

To determine

Investment: To get the financial benefits, money spends or invests is known as investment. The benefits can be in the form of dividend, interest, and rental income.

Financial statements: Financial statements refer to those statements, which are prepared by the company at the end of the accounting period in the particular formats which are prescribed in accounting to show its financial position.

Income Statement: A part of financial statements that lists the income and expenses of business for an accounting year is called income statement. It is prepared at the end of accounting period to know the profitability of a business. All the expenses are listed on the debit side and the income or revenues are listed on the credit side. The difference of both sides is called net profit or net loss.

Balance sheet: Balance sheet is a part of financial statements that lists company’s assets, liabilities and shareholders’ fund. It is prepared at the end of accounting period and informs about company’s financial position on that day.

To prepare: The financial statements of Company M.