E1-8

Accounting 300

E1 - 8

Student Name

University of Phoenix

Principles of Accounting ACC/300

March 15, 2012

Professor:

E1-8

The following items and amounts were taken from Linus Inc.’s 2012 income statement and balance sheet. The information is classified with letters that represents assets (A), liabilities (L), stockholder’s equity (SE), revenues (R), and expenses (E).

__A___ | Cash | $ 84,700 |

_SE___ | Retained earnings | 123,192 |

__E___ | Cost of goods sold | 438,458 |

__E___ | Salaries and wages expense | 115,131 |

__A__ | Prepaid insurance | 7,818 |

__A___ | Inventory | $ 64,618 |

__A__ | Accounts receivable | 88,419 |

__R___ | Sales revenue | 584,951 |

__L___ | Income taxes payable | 6,499 |

__L___ | Accounts payable | 49,384 |

__R___ | Service revenue | 4,806 |

__E___ | Interest expense | 1,882 |

Financial Statement Components

Business use financial statements to track the economic, past present, and future of the company. The financial statement is the basic tool to obtain loans, prepare business plans, determine the action plans, and provide general information for investors. The basic financial statements components include the balance sheet, the income statement, and the cash flow statements.

Balance Sheet

The balance sheet contains information reported at a moment in time about resources and assets controlled by the business. The balance sheet also contains information about the business obligations and operating cost. The last part in the balance sheet included the owners equity witch are the net assets who are calculated as Assets – Liabilities = Owners’ Equity.

Income Statement

The income statement in its basic reporting contains information about revenues,

expenses, and net income. Net income is what remains of the revenues after covering the expenses. The income statement provides a general view of the money obtained from the business activity.

Cash flow

The cash flow statement provides...