1. Journalizing 2. Posting 3. Trial Balance Activity 1 Transaction Analysis The following are transactions of Juan dela Cruz for August 2020. The company uses a periodic inventory system. (Assume the company is a non-Vat registered business). August 1 Juan dela Cruz invested the following assets in his business: P400,000 cash; P50,000 worth of desks and chairs and store equipment valued at P20,000. Mr. dela Cruz bought a computer for his business worth P60,000 giving a P10,000 down payment and the balance payable at the end of the month. Purchased merchandise for cash, P12,000. Purchased merchandise from SM, P18,000. Terms 2/10, n/30. Purchased office supplies on account, P3,000 Sold merchandise to Mr. Allan on account, P40,00, terms, 2/10, n/30, FOB destination. Paid advertising for the month of P15,000. Purchased merchandise from XYZ Company, P20,000, terms 1/15, n/30, Cash sales, P18,000. 7 8 Received credit for P2,000 from XYZ Company as an allowance for a slight defect on merchandise purchased. Sold merchandise to Ms. Ramilyn on account, P40,000, terms 2/10, n/30, FOB Destination. Paid freight on sale made to Ms. Ramilyn P1,000. Issued check to SM in full payment for the August 4 account. Sold merchandise to Mr. DJ P25,000, terms 2/10, n/30. Collected the amount due from Mr. Alan for his August 6 account. Received payment from Ms. Ramilyn. Paid the amount due to XYZ Company. Paid the August 2, invoice. 10 12 13 14 18 21 22 23 31 345lo
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
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