(1)
Transaction: The economic events which bring about any changes in the financial items of a business, and can be measured in the monetary units are referred to as transactions.
Accounting equation is expressed as shown below:
Income statement: The financial statement which reports revenues and expenses from business operations, and the result of those operations as net income or net loss for a particular time period is referred to as income statement.
Statement of retained earnings: This statement reports the beginning retained earnings and all the changes which led to ending retained earnings. Net income from income statement is added to and dividends is deducted from beginning retained earnings to arrive at the end result, ending retained earnings.
To analyze: The transactions of AP, using the accounting equation in the given format
(2) (a)
To prepare: Income statement of AP for the month ended December 31, 2018.
(b)
To prepare: Statement of retained earnings of AP for the month ended December 31, 2018.
(c)
To prepare: Balance sheet of AP on December 31, 2018.
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Horngren's Financial & Managerial Accounting, The Financial Chapters (6th Edition)
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