11 Cash $3,920 1,000 41 Fees Earned $6,200 50 Wages Expense 51 Office Rent Expense 52 Equipment Rent Expense 53 Utilities Expense 54 Music Expense 55 Advertising Expense 56 Supplies Expense 12 Accounts Receivable 400 14 Supplies 15 Prepaid Insurance 17 Office Equipment 21 Accounts Payable 170 800 675 300 250 1,590 23 Unearned Revenue 500 31 Common Stock 4,000 180 33 Dividends 500 59 Miscellaneous Expense 415
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.
The transactions completed by PS Music during June 20Y'5 were described at the end of Chapter 1. The following transactions were completed during July, the second month of the business's operations:
July 1. Peyton Smith made an additional investment in PS Music in exchange for common stock by depositing
$5,000 in PS Musics checking account.
1. Instead of continuing to share office space with a local real estate agency, Peyton decided to rent office space near a local music store. Paid rent for July, $1,750.
1. Paid a premium of $2,700 for a comprehensive insurance policy covering liability, theft, and fire. The policy covers a one-year period.
2. Received $ 1,000 on account.
3. On behalf of PS Music. Peyton signed a contract with a local radio station. KXMD. to provide guest spots for the next th ree months. The contract requires PS Music to provide a guest disc jockey for 80 hours per month for a monthly fee of $3,600. Any additional hours beyond 80 will be billed to KXMD at $40 per hour. In accor dance with the contract. Peyton received $7,200 from KXMD as an advance payment for the first two months.
3. Paid $250 on account
4. Paid an attorney $900 for reviewing the July 3 contract with KXMD. (Record as Miscellaneous Expense.)
5. Purchased office equipment on account from Office Mart $7,500.
8. Paid for a newspaper advertisement. $200.
11. Received $ 1,000 for serving as a disc jockey for a party.
13. Paid $700 to a local audio electronics store for rental of digital recording equipment
14. Paid wages of $ 1,200 to receptionist and part-time assistant
Enter the foUou'inji transactions on Page 2 of the tiro-column journal:
16. Received $2,000 for serving as a disc jockey for a wedding reception.
18. Purchased supplies on account, $850.
21. Paid $620 to Upload Music for use of its current music demos in making various music sets.
22. Paid $800 to a local radio station to advertise the services of PS Music twice daily for the remainder of July.
23. Served as disc jockey for a party for $2,500. Received $750, with the remainder due August 4. 20Y5.
27. Paid electric bill, $915.
28. Pa id wages of $ 1,200 to receptionist and part-time assistant
29. Paid miscellaneous expenses. $540.
30. Served as a disc jockey for a charity ball for $ 1,500. Received $500, with the remainder due on August 9, 2OY5.
31. Received $3,000 for serving as a disc jockey for a party.
31. Paid $1.400 royalties (music expense) to National Musk Clearing for use of various artists'music during July.
31. Paid dividends, $1,250.
PS Music's chart of accounts and the ha lance of accounts as of July 1, 2OY5 (all normal balances), are as follows:
Instructions:
1. Enter the July 1, 2OY5, account balances in the appropriate balance column of a four-column account. Write Balance in the Item column, and place a check mark (✓) in the Posting Refer ence column. (Hint: Verify the equality of the debit and credit balances in the ledger before proceeding with the next instruction.)
2. Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting
3- Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting.
4. Prepare an unadjusted
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