For each of the items listed below. identify the appropriate financial statement element.

For each of the items listed below, identify the
appropriate financial statement element.

1.
Obligation to transfer cash or other resources as a result of a
past transaction.

2. Dividends
paid by a corporation to its
shareholders.

3. Inflow of
an asset from providing a good or
service.

4. The
financial position of a
company.

5. Increase
in equity during a period from no owner transactions.

6. Increase
in equity from peripheral or incidental
transaction.

7. Sale of
an asset used in the operations of a business for less than the
asset%u2019s book
value.

8. The
owners%u2019 residual interest in the assets of a
company.

9. An item
owned by the company representing probable future
benefits.

10. Revenues plus gains
less expenses and losses.

11. An owner%u2019s
contribution of cash to a corporation in exchange for ownership
shares of stock.

12. Outflow of an asset
related to the production of
revenue.

For each of the items listed below, identify the
appropriate financial statement element.

1.
Obligation to transfer cash or other resources as a result of a
past transaction.

2. Dividends
paid by a corporation to its
shareholders.

3. Inflow of
an asset from providing a good or
service.

4. The
financial position of a
company.

5. Increase
in equity during a period from no owner transactions.

6. Increase
in equity from peripheral or incidental
transaction.

7. Sale of
an asset used in the operations of a business for less than the
asset%u2019s book
value.

8. The
owners%u2019 residual interest in the assets of a
company.

9. An item
owned by the company representing probable future
benefits.

10. Revenues plus gains
less expenses and losses.

11. An owner%u2019s
contribution of cash to a corporation in exchange for ownership
shares of stock.

12. Outflow of an asset
related to the production of
revenue.

For each of the items listed below, identify the
appropriate financial statement element.
For each of the items listed below, identify the
appropriate financial statement element.

1.
Obligation to transfer cash or other resources as a result of a
past transaction.

2. Dividends
paid by a corporation to its
shareholders.

3. Inflow of
an asset from providing a good or
service.

4. The
financial position of a
company.

5. Increase
in equity during a period from no owner transactions.

6. Increase
in equity from peripheral or incidental
transaction.

7. Sale of
an asset used in the operations of a business for less than the
asset%u2019s book
value.

8. The
owners%u2019 residual interest in the assets of a
company.

9. An item
owned by the company representing probable future
benefits.

10. Revenues plus gains
less expenses and losses.

11. An owner%u2019s
contribution of cash to a corporation in exchange for ownership
shares of stock.

12. Outflow of an asset
related to the production of
revenue.

1.
Obligation to transfer cash or other resources as a result of a
past transaction.

2. Dividends
paid by a corporation to its
shareholders.

3. Inflow of
an asset from providing a good or
service.

4. The
financial position of a
company.

5. Increase
in equity during a period from no owner transactions.

6. Increase
in equity from peripheral or incidental
transaction.

7. Sale of
an asset used in the operations of a business for less than the
asset%u2019s book
value.

8. The
owners%u2019 residual interest in the assets of a
company.

9. An item
owned by the company representing probable future
benefits.

10. Revenues plus gains
less expenses and losses.

11. An owner%u2019s
contribution of cash to a corporation in exchange for ownership
shares of stock.

12. Outflow of an asset
related to the production of
revenue.

1.
Obligation to transfer cash or other resources as a result of a
past transaction.
2. Dividends
paid by a corporation to its
shareholders.
3. Inflow of
an asset from providing a good or
service.
4. The
financial position of a
company.
5. Increase
in equity during a period from no owner transactions.
6. Increase
in equity from peripheral or incidental
transaction.
7. Sale of
an asset used in the operations of a business for less than the
asset%u2019s book
value.
8. The
owners%u2019 residual interest in the assets of a
company.
9. An item
owned by the company representing probable future
benefits.
10. Revenues plus gains
less expenses and losses.
11. An owner%u2019s
contribution of cash to a corporation in exchange for ownership
shares of stock.
12. Outflow of an asset
related to the production of
revenue.

General guidance

Concepts and reason
Financial statements: Financial statements represent the financial position of an entity or business. It gives the information about the company’s assets, liabilities, equity and hence the financial performance.
The financial statements broadly consist of the following things, namely:
• Income statement
• Balance sheet
• Cash flow statement

Fundamentals

Some elements of financial statements
Assets: these are the future economic benefits owned by the company. Some examples of assets are Building, equipment land etc.
Liabilities: these are the obligation due to the past events or transactions which would result in outflow of assets. Some examples of liabilities are creditors, expenses payable etc.
Equity: Equity represents the amount contributed by the owners of the company.
Revenues: These are the consideration received by any business due to rendering of services or sale of goods.
Expenses: Expenses represents the outflow of funds or assets occurred in the course of business or in the furtherance of business. Expenses incurred in the course of business mean outflow of such funds or assets to earn revenue and furtherance of business means the ancillary activities like removal of asset etc. resulting in removal of funds.
Gains: Gain refers to increase in the owner’s equity due to reasons other than investments made or earnings from the business operations.
Losses: Losses refer to decrease in the owner’s equity due to reasons other than withdrawal of investments or from activities which are outside the ambit of normal business operations.

Step-by-step

Step 1 of 12

1.
Appropriate financial statement element: Liability

Part 1
Appropriate financial statement element: Liability

Liability means an obligation which results in transfer of the assets or resources as a result of any past transaction or events. Thus, the obligation to transfer cash or other resources as a result of past transaction will be a liability element in the financial statement.

Based on the information given in the question, identify the elements of financial statement for Item No.2.

Step 2 of 12

2.
Appropriate financial statement element: Retained earnings (under Stockholders’ Equity)

Part 2
Appropriate financial statement element: Retained earnings

Dividends are part of the income which is distributed by the company to its shareholders.
Payment of dividend results in reduction of the retained earnings.
Thus, dividends paid by a corporation to its shareholders will be part of retained earnings (as a deduction) in the financial statement.

Based on the information given in the question, identify the elements of financial statement for Item No.3.

Step 3 of 12

3.
Appropriate financial statement element: Revenue

Part 3
Appropriate financial statement element: Revenue

A business earns its income either by way of selling the goods or by rendering services. The consideration in return could be in the form of cash or could be a right to receive cash in future (that is, receivables). Thus, the inflow of asset from providing a good or service will be reported in revenue in the income statement.

Based on the information given in the question, identify the elements of financial statement for Item No.4.

Step 4 of 12

4.
Appropriate financial statement element: Balance sheet

Part 4
Appropriate financial element: Balance sheet

A balance sheet shows balances of a business’ assets, liabilities and equity on a particular date. Thus, the financial position of any business can be ascertained with the help of its balance sheet.

Based on the information given in the question, identify the elements of financial statement for Item No.5.

Step 5 of 12

5.
Appropriate financial element: Comprehensive income

Part 5
Appropriate financial element: Comprehensive income

Comprehensive income means, the income that changes the equity balance due to non-owner transactions; meaning, that it is a change in the equity balance not due to the transactions like investment by owners or distribution to owners etc.
Comprehensive income is the sum of net income earned from the business operations and the other comprehensive income (gains or losses which are not yet realized) which needs to be reported via the income statement. However, the other comprehensive incomes are reported separately from the net income.
Thus, an increase in the equity during a period from no owner transactions could be identified from the comprehensive income of that period. Further, the comprehensive income is reported in the statement of changes in equity to show the effect of such income in the equity balance.

Based on the information given in the question, identify the elements of financial statement for Item No.6.

Step 6 of 12

6.
Appropriate financial element: Gains

Part 6
Appropriate financial element: Gains

Peripheral transactions are those transactions which are not related to the core activities of the business; however, these are accounted for in the books. Peripheral activities (whether resulting in gain or loss) are reported in the income statement along with the income due to the core business operations.
Further, the equity balance increases whenever there is a gain from the peripheral activity as net income increases due to such gains. An example of gain from peripheral activity is sale of asset over and above the book value.
Thus, an increase in equity from peripheral or incidental transactions can be identified from the gains, which are reported in the income statement.

Based on the information given in the question, identify the elements of financial statement for Item No.7.

Step 7 of 12

7.
Appropriate financial element: Losses

Part 7
Appropriate financial element: Losses

Selling of an asset is peripheral activity; that is, activity which does not relate to core operations of a company and these are reported in the income statement itself, however separately.
An entity incurs loss whenever it sells its asset which was used in its business’ operation for a value less than its book value. Such loss can be identified from the losses part of the income statement.

Based on the information given in the question, identify the elements of financial statement for Item No.8.

Step 8 of 12

8.
Appropriate financial element: Equity

Part 8
Appropriate financial element: Equity

From finance perspective, a business in general is comprised of 3 things; namely, assets, liabilities and equity. Assets are the resources which are owned by a business and liabilities and equity are the source from which such assets are acquired. Further, equity represents the fund invested by the stockholders into the business plus the retained earnings which are a part of business’s net income retained into the business.
Thus, the accounting equation describes any business as follows:

From the above equation, it can be said that the equity is the residual value, left after reducing the liabilities from it.

Thus, it can be said that the owners’ residual interest in the asset of a company is equity.

Based on the information given in the question, identify the elements of financial statement for Item No.9.

Step 9 of 12

9.
Appropriate financial statement element: Asset

Part 9
Appropriate financial statement element: Asset

Assets are defined as future economic benefits that are owned by the company. Assets are reported in the balance sheet (a part the financial statements.)
Thus, an item owned by the company representing probable future benefit, is called as assets.

Based on the information given in the question, identify the elements of financial statement for Item No.10.

Step 10 of 12

10.
Appropriate financial element: Net Income

Part 10
Appropriate financial element: Net Income

Net income represents the amount left with the company after adding the gains and reducing the expenses and losses from the sales revenue. An entity’s net income can be ascertained by analyzing its income statement.
Thus, it can be said that revenues plus gains less expenses and losses is the net income of a business.

Based on the information given in the question, identify the elements of financial statement for Item No.11.

Step 11 of 12

11.
Appropriate financial element: Common stock

Part 11
Appropriate financial element: Common stock

A company raises funds by issuing stocks/shares in return. The amount so raised by issuing shares (also known as the common stock) represents the amount contributed by the equity shareholders of the company.
The equity shareholders are also known as the owners of the company; and thus, the owners’ contribution of cash to a corporation in exchange of ownership shares of stock is represented under common stock. Further, common stock is the part of shareholders’ equity which is presented under the balance sheet.

Based on the information given in the question, identify the elements of financial statement for Item No.12.

Step 12 of 12

12.
Appropriate financial element: Expenses

Part 12
Appropriate financial element: Expenses

A company earns revenue either by rendering services or by selling the goods. In doing so, it incurs certain expenses which results in outflow of funds or assets (like cash for payment of bills, raw material for production etc.). Thus, it can be said that the element in the financial statement which represents the outflow of an asset related to production of revenue are expenses.

Answer

Part 1
Appropriate financial statement element: Liability

Part 2
Appropriate financial statement element: Retained earnings

Part 3
Appropriate financial statement element: Revenue

Part 4
Appropriate financial element: Balance sheet

Part 5
Appropriate financial element: Comprehensive income

Part 6
Appropriate financial element: Gains

Part 7
Appropriate financial element: Losses

Part 8
Appropriate financial element: Equity

Part 9
Appropriate financial statement element: Asset

Part 10
Appropriate financial element: Net Income

Part 11
Appropriate financial element: Common stock

Part 12
Appropriate financial element: Expenses

Answer only
Part 1
Appropriate financial statement element: Liability

Part 2
Appropriate financial statement element: Retained earnings

Part 3
Appropriate financial statement element: Revenue

Part 4
Appropriate financial element: Balance sheet

Part 5
Appropriate financial element: Comprehensive income

Part 6
Appropriate financial element: Gains

Part 7
Appropriate financial element: Losses

Part 8
Appropriate financial element: Equity

Part 9
Appropriate financial statement element: Asset

Part 10
Appropriate financial element: Net Income

Part 11
Appropriate financial element: Common stock

Part 12
Appropriate financial element: Expenses

Asset = Liability + Equity
Equity = Assets -Liabilities