Question

Additional Exercise 243

The adjusted trial balance of C.S. Financial Planners appears below.

C.S. Financial Planners Adjusted Trial Balance December 31, 2018
		Debit		Credit
Cash		$4,900
Accounts Receivable		2,200
Supplies		1,800
Equipment		15,000
Accumulated Depreciation—Equipment				$4,000
Accounts Payable				3,300
Unearned Service Revenue				6,000
Common Stock				10,000
Retained Earnings				4,400
Dividends		2,500
Service Revenue				4,200
Supplies Expense		600
Depreciation Expense		2,500
Rent Expense		2,400
		$31,900		$31,900

Using the information from the adjusted trial balance, you are to prepare for the month ending December 31, 2018:

1. An income statement. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

2. A retained earnings statement.

3. A balance sheet. (List Current Assets in order of liquidity.)

Answer 1

The income statement shows the total income earned during the period and total expenses incurred during the period and difference is net profit or loss for the period.

The statement of retained earnings is profit retained in the business which starts from the opening balance and then add/less net profit/loss and less dividend distributed to shareholders.

Balance sheet shows the financial position of all the assets and liabilities of the business and remaining part of liabilites is shareholder’s equity. Current assets are shown in the order of liquidity. Asset is called as most liquid asset if it can be converted into cash immediately. Therefore, most liquid asset is cash itself.