1. Prepare PB’s income statement for the year ended 31 December 2016. Use the single-step format, with all revenues and all expenses listed together. 2. Prepare PB’s classified balance sheet at 31 December 2016. 3. Prepare PB’s statement of cash flows using the indirect method for the year ended 31 December 2016.
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.
Perkasa Berhad (PB) was formed on 1 January 2016. Additional data for the year follow:
a. On 1 January 2016, PB issued no par common stock for RM500,000.
b. Early in January, PB made the following cash payments:
1. For store fixtures, RM54,000
2. For merchandise inventory, RM270,000
3. For rent expense on a store building, RM11,000
c. Later in the year, PB purchased merchandise inventory on account for RM244,000. Before year-end, PB paid RM144,000 of this account payable.
d. During 2016, PB sold 2,300 units of merchandise inventory for RM225 each. Before year-end, the company collected 90% of this amount. Cost of goods sold for the year was RM320,000 and ending merchandise inventory totaled RM194,000.
e. The store employs three people. The combined annual payroll is RM88,000, of which PB still owes RM6,000 at year-end.
f. At the end of the year, PB paid income tax of RM20,000. There are no income taxes payable.
g. Late in 2016, PB paid cash dividends of RM35,000.
h. For store fixtures, PB uses the
Requirements:
1. Prepare PB’s income statement for the year ended 31 December 2016. Use the single-step format, with all revenues and all expenses listed together.
2. Prepare PB’s classified
3. Prepare PB’s statement of
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 3 images
