Exercise 2-26A: Relationship of Accounts to Financial Statements

Identify whether each of the following items would appear on the income statement (IS), statement of changes in stockholders' equity (SE), balance sheet (BS), or statement of cash flows (CF). Some items may appear on more than one statement: if so, identify all applicable statements. If an item would not appear on any financial statement, label it NA.

\begin{tabular}{|l|l|l|l|}
\hline
\textbf{Items} & \textbf{IS, SE, BS, OR CF} & \textbf{Item} & \textbf{IS, SE, BS, OR CF} \\
\hline
Supplies & & Rent Expense & \\
\hline
\begin{tabular}{l}
Cash Flow from Financing \\
Activities
\end{tabular} & & Price/Earnings Ratio & \\
\hline
"As of" Date Notation & & Taxes Payable & \\
\hline
Ending Retained Earnings & & Unearned Revenue & \\
\hline
Net Income & & Service Revenue & \\
\hline
Dividends & & \begin{tabular}{l}
Cash Flow from Investing \\
Activities
\end{tabular} & \\
\hline
Net Change in Cash & & Consulting Revenue & \\
\hline
Net Change in Cash & & Utilities Expense & \\
\hline
"For the Period Ended" & & Operating Expenses & \\
\hline
Land & & \begin{tabular}{l}
Beginning Retained \\
Earnings
\end{tabular} & \\
\hline
Ending Common Stock & & Beginning Common Stock & \\
\hline
Salaries Expense & & Prepaid Insurance & \\
\hline
Prepaid Rent & & Beginning Cash Balance & \\
\hline
Accounts Payable & & Ending Cash Balance & \\
\hline
Total Assets & & & \\
\hline
\begin{tabular}{l}
Salaries Payable \\
Insurance Expense \\
Notes Payable \\
Accounts Receivable \\
Interest Receivable \\
Interest Revenue
\end{tabular} & & & \\
\hline
\end{tabular}



Answer :

Certainly! Let's identify which financial statements each of these items appear on. Here's a detailed, step-by-step solution for each item:

1. Supplies: This item would appear on the Balance Sheet (BS).
2. Rent Expense: This item would appear on the Income Statement (IS).
3. Cash Flow from Financing Activities: This item would appear on the Statement of Cash Flows (CF).
4. Price/Earnings Ratio: This item does not appear on any financial statement. It is labeled as Not Applicable (NA).
5. "As of" Date Notation: This item is related to the Balance Sheet (BS).
6. Taxes Payable: This item would appear on the Balance Sheet (BS).
7. Ending Retained Earnings: This item would appear on the Statement of Changes in Stockholders' Equity (SE).
8. Unearned Revenue: This item would appear on the Balance Sheet (BS).
9. Net Income: This item appears on both the Income Statement (IS) and the Statement of Changes in Stockholders' Equity (SE).
10. Service Revenue: This item would appear on the Income Statement (IS).
11. Dividends: This item would appear on the Statement of Changes in Stockholders' Equity (SE).
12. Cash Flow from Investing Activities: This item would appear on the Statement of Cash Flows (CF).
13. Net Change in Cash: This item would appear on the Statement of Cash Flows (CF).
14. Consulting Revenue: This item would appear on the Income Statement (IS).
15. Utilities Expense: This item would appear on the Income Statement (IS).
16. "For the Period Ended": This item is related to the Income Statement (IS).
17. Operating Expenses: This item would appear on the Income Statement (IS).
18. Land: This item would appear on the Balance Sheet (BS).
19. Beginning Retained Earnings: This item would appear on the Statement of Changes in Stockholders' Equity (SE).
20. Ending Common Stock: This item would appear on the Statement of Changes in Stockholders' Equity (SE).
21. Beginning Common Stock: This item would appear on the Statement of Changes in Stockholders' Equity (SE).
22. Salaries Expense: This item would appear on the Income Statement (IS).
23. Prepaid Insurance: This item would appear on the Balance Sheet (BS).
24. Prepaid Rent: This item would appear on the Balance Sheet (BS).
25. Beginning Cash Balance: This item would appear on the Statement of Cash Flows (CF).
26. Accounts Payable: This item would appear on the Balance Sheet (BS).
27. Ending Cash Balance: This item would appear on the Statement of Cash Flows (CF).
28. Total Assets: This item would appear on the Balance Sheet (BS).
29. Salaries Payable: This item would appear on the Balance Sheet (BS).
30. Insurance Expense: This item would appear on the Income Statement (IS).
31. Notes Payable: This item would appear on the Balance Sheet (BS).
32. Accounts Receivable: This item would appear on the Balance Sheet (BS).
33. Interest Receivable: This item would appear on the Balance Sheet (BS).
34. Interest Revenue: This item would appear on the Income Statement (IS).

In summary, here are the items categorized accordingly:

| Items | IS, SE, BS, OR CF |
|-------------------------------------------|-------------------|
| Supplies | BS |
| Rent Expense | IS |
| Cash Flow from Financing Activities | CF |
| Price/Earnings Ratio | NA |
| "As of" Date Notation | BS |
| Taxes Payable | BS |
| Ending Retained Earnings | SE |
| Unearned Revenue | BS |
| Net Income | IS, SE |
| Service Revenue | IS |
| Dividends | SE |
| Cash Flow from Investing Activities | CF |
| Net Change in Cash | CF |
| Consulting Revenue | IS |
| Utilities Expense | IS |
| "For the Period Ended" | IS |
| Operating Expenses | IS |
| Land | BS |
| Beginning Retained Earnings | SE |
| Ending Common Stock | SE |
| Beginning Common Stock | SE |
| Salaries Expense | IS |
| Prepaid Insurance | BS |
| Prepaid Rent | BS |
| Beginning Cash Balance | CF |
| Accounts Payable | BS |
| Ending Cash Balance | CF |
| Total Assets | BS |
| Salaries Payable | BS |
| Insurance Expense | IS |
| Notes Payable | BS |
| Accounts Receivable | BS |
| Interest Receivable | BS |
| Interest Revenue | IS |

Each financial statement carries specific types of information, and understanding these categorization helps in comprehending where certain financial elements belong.