Question: 1. Assume that Donahue Consulting erroneously recorded the payment of $11,500 of dividends as salary expense.
(a) How would this error affect the equality of the accounting equation?
(b) How would this error affect the income statement, retained earnings statement, balance sheet, and statement of cash flows?
2. What are the basic elements of a financial accounting system? Do these elements apply to all businesses from a local restaurant to General Motors? Explain.