Question

For each item below, indicate to which category of elements of financial statements it belongs.

(a) Retained earnings select a category of elements of financial statements
(b) Sales select a category of elements of financial statements
(c) Additional paid-in capital select a category of elements of financial statements
(d) Inventory select a category of elements of financial statements
(e) Depreciation select a category of elements of financial statements
(f) Loss on sale of equipment select a category of elements of financial statements
(g) Interest payable select a category of elements of financial statements
(h) Dividends select a category of elements of financial statements
(i) Gain on sale of investment select a category of elements of financial statements
(j) Issuance of common stock

Answer 1

Answer: (a) Retained earnings = Equity.

(b) Sales = Revenues.

(c) Additional paid-in capital = Equity.

(d) Inventory = Assets.

(e) Depreciation = Expenses.

(f) Loss on sale of equipment = Losses.

(g) Interest payable = Liability.

(h) Dividends = Dividends payable are a liability. Dividends paid are a decrease in the accumulated results of the company as they are distributed to the owners.

(i) Gain on sale of investment = Gains.

(j) Issuance of common stock =  are investments by the owners that become part of the capital.