Chapter 1, Problem 1.8EYCT

(a)

To determine

Balance sheet

Balance sheet 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 write: in a memo (a) The purpose of a balance sheet.

(b)

To determine

To write: in a memo (a) The purpose of a balance sheet, and (b) Reason for this incorrect balance sheet and show how to correct it.