Anne Marie is the owner of Annes Beauty Salon, Inc. Her accountant has prepared financial statements for the year 20XX for her business. She doesn't like to ask him questions about it. She would rather ask you as you are her friend and since she knows that you are taking an accounting course, she asks you the following questions:

1. My accountant told me that the balance sheet shows assets = liabilities plus equity. What does that mean?
2. What is equity?
3. Why are there four different financial statements? Why cant they put all this information into one statement?
4. I dont understand what the Statement of Retained Earnings is all about. What is retained earnings?
5. She also asked about dividends. What are they? Will they increase expenses?