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¶ … Financial Statements
ATTN: Aunt Cookie It also reduces the rent column by the same amount as cash is reduced by, since both are being decreased by the payment. This transaction does not affect liabilities, since it is not incurring debt, and also does not affect equity, since the asset increased is property owned (the paid rent) and not a capital asset. In December, when the prepaid rent is utilized for the month's rent expense, it will be deducted from the company's asset of prepaid rent and deducted from the expense of rent for an equal amount.
Re: Specific Financial Statement Questions
With regard to the questions you raised about your financial statements for last year and the current year (about prepaid rent, interest on notes payable, cash advances as revenue, and how owner equity is affected by each of these items), I have prepared explanations for each topic below.
A) Prepaid rent is shown as a cash asset because the early payment creates an increase in the firm's property. It does this by guaranteeing an expense is paid for early, decreasing the firm's expenses for future months and in doing so increasing property owned (the
B) Regarding the $10,000 bank note: Interest for the entire note is listed as an expense incurred for the period in which the note was taken…
Financial Statement Differentiation Analysis of the Use of Four Types of Financial Statements The four fundamental types of financial statements include the balance sheet, income statement, statement of retained earnings and statement of cash flows and each meets a very specific series of needs within a business. Investors are most interested in the risk profiles of companies they are interested in investing in more than any other information element. Creditors are most
The former deducts the inventory figure from the current assets value. In the years under consideration, both the current ratio and the quick ratio of McDonald's decreased (see table 1). In that regard, the company's ability to settle its debts in the short run seems to have been impaired within the period under consideration. It is however important to note that with a current ratio and quick ratio of more
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Financial Statement Review Costa Company Balance Sheet Assets Cash Accounts Receivable Equipment (net of depreciation) Inventory Total Assets Liabilities Accounts Payable Long-term Debt Total Liabilities Stockholder's Equity Common Stock Paid in Capital Retained Earnings Total Stockholder's Equity Total Liabilities and Stockholder Equity Costa Company Income Statement Revenue Cost of Goods Sold Gross Profit Expenses Depreciation Expense Insurance Marketing Misc Expense Property Taxes Salaries Utilities Rent Total Expenses Net Income Balance Sheet errors effect the presentation of assets, liabilities, and equity where the Income Statement errors effect the classification of revenues and expenses (Kieso, Weygandt, & Warfield 2008, p 1174). The physical count of inventory shows the
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