1. Salaries are paid every Friday for a 5-day work week. The normal weekly payroll is $40,000. The year-end falls on a Tuesday this year. 2. The company has a $20,000, 9-month, 12% (annual rate) note payable outstanding at the end of the year. The note was issued on October 1; the interest is due when the note is paid. Copyright 200 Cengage Leening. All Rights Reservod. May not be copiod, scanned, or duplicated, in whele or in part. Due to clectronic rights, some third party content may be suppressed from the eBook andier oChapterts). Editorial review has deemed that any suppessed content does not materially affect the overall learning experience. Cengage Learming reserves the right to remove additional contem at any time if subsequent rights restrictions require it. Problems 3-51 3. Examining the Rent Expense account, the controller finds that it includes a $4,800 advance payment for 3 months' rent. The payment was made on November 1. 4. The storeroom contains $500 of office supplies. At the beginning of the year, there were no office supplies. During a year, the company purchascd $3,500 of office supplics which were debited to the Office Supplies account. 5. The company received a large order in May with a $13,000 advance payment. The advance payment was cred- ited to Unearned Revenue. In November, the order was delivered to the customer.
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.
At the end of the current year, Jodi Corporation's controller discovers the following items of information: For each of the preceding items, indicate the effect on net income, assets, liabilities, and sharel1olders’ eq山ty in 由e financial statements of the company for the year if the controller fails to make an
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