Carol Young is the bookkeeper for Evans Company, Inc. Carol has been trying to get the company’s balance sheet to balance. She finally got it to balance, but she still isn't sure that it is correct.

EVANS COMPANY, INC.

Balance Sheet For the Month Ended December 31, 2007 Assets Liabilities and Stockholders’ Equity Equipment $20,500 Common stock $11,000 Cash 10,500 Accounts receivable (3,000)

Supplies 2,000 Dividends (2,000)

Accounts payable (5,000) Notes payable 12,000 Total assets $28,000 Retained earnings _10,000 Total liabilities and stockholders’ equity $28,000 Instructions Explain to Carol Young in a memo

(a) the purpose of a balance sheet, and

(b) why this balance sheet is incorrect and what she should do to correct it.

ETHICS CASE