Flow of Accounts into Financial Statements

Question

The balances for the accounts that follow appear in the Adjusted Trial Balance columns of the end-of-period spreadsheet. Indicate whether each account would flow into the income statement, statement of stockholders’ equity, or balance sheet.

Line Item Description Classification
1. Accounts Payable
2. Accounts Receivable
3. Cash
4. Dividends
5. Fees Earned
6. Supplies
7. Unearned Rent
8. Utilities Expense
9. Wages Expense
10. Wages Payable

Answer 1

Here’s how each account would flow into the financial statements:

| Line Item Description | Classification | |-----------------------------|---------------------------------------| | 1. Accounts Payable | Balance Sheet | | 2. Accounts Receivable | Balance Sheet | | 3. Cash | Balance Sheet | | 4. Dividends | Statement of Stockholders’ Equity | | 5. Fees Earned | Income Statement | | 6. Supplies | Balance Sheet | | 7. Unearned Rent | Balance Sheet | | 8. Utilities Expense | Income Statement | | 9. Wages Expense | Income Statement | | 10. Wages Payable | Balance Sheet |

Explanation:

• Balance Sheet Accounts: These include assets, liabilities, and stockholders' equity accounts (e.g., Accounts Payable, Accounts Receivable, Cash, Supplies, Unearned Rent, Wages Payable).
• Income Statement Accounts: These include revenue and expense accounts (e.g., Fees Earned, Utilities Expense, Wages Expense).
• Statement of Stockholders' Equity Accounts: This includes dividends, which affect retained earnings.

Each of these classifications helps categorize and better understand the financial standing and performance of a business.