Allow a business owner to understand how much money she has put into the business so far? a. the balance sheet b. the statement of owner’s equity c. the statement of cash flows

b. the statement of owner’s equity

Explanation:

There are mainly three types of financial statement which are explained below:

1. Balance sheet: In the balance sheet, the assets, liabilities, and stockholder equity is recorded. In this the accounting equation is used which is shown below:  

Total assets = Total liabilities + stockholder equity  

The debit and credit side of the balance sheet should always be equal and balanced.  

Moreover, it always is prepared on the specified date.

2. Stockholder equity:

The statement of stockholder's equity comprises common stock and retained earnings. It talks about the capital which is to be invested in the business. The following calculations are to be computed while computing the ending balances

The ending balance of retained earning = Beginning balance of retained earnings + net income - dividend paid

And, the ending balance of the common stock = Beginning balance of common stock + issued shares

3. There are three types of activities in the cash flow statement which are described below:  

a. Operating activities: It includes those transactions which affect the working capital after net income. The increase in current assets and a decrease in current liabilities would be deducted whereas the decrease in current assets and an increase in current liabilities would be added.  

These changes in working capital would be adjusted. Moreover, the depreciation expense is added to the net income

b. Investing activities: It records those activities which include purchase and sale of the long term assets. The purchase is an outflow of cash whereas sale is an inflow of cash

c. Financing activities: It records those activities which affect the long term liability and shareholder equity balance. The issue of shares is an inflow of cash whereas redemption and dividend is an outflow of cash.

4. In the income statement, the total revenues and the total expenses are recorded.  If the total revenues are more than the total expenditure then the company earns net income

And, If the total revenues are less than the total expenditure then the company have a net loss

This net income or net loss would reflect in the statement of the retained earning account.

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