1a. Prepare an income statement for the year. 1b. Prepare a statement of retained earnings for the year. 1c. Prepare a classified balance sheet at December 31.
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 adjusted trial balance of Karise Repairs on December 31 follows.
KARISE REPAIRS
Adjusted Trial Balance
December 31
Number
Account Title
Cash
Office supplies
Prepaid insurance
Equipment
Accumulated depreciation-Equipment
Accounts payable
Wages payable
Common stock
Retained earnings
Dividends
Services revenue
Debit
Credit
101
$ 14,000
1,300
2,050
50,000
124
128
167
168
201
$ 5,000
14,000
210
600
307
10,000
23,000
318
319
16,000
403
612
623
637
640
650
690
90,950
Depreciation expense-Equipment
Wages expense
Insurance expense
5,000
37,500
800
10,600
3,600
2,700
ences
Rent expense
Office supplies expense
Utilities expense
Totals
$ 143,550 $ 143,550
Note: Retained Earnings account balance was $23,000 on December 31 of the prior year.
Required:
1a. Prepare an income statement for the year.
1b. Prepare a statement of retained earnings for the year.
1c. Prepare a classified balance sheet at December 31.
2. Prepare the December 31 closing entries.
Complete this question by entering your answers in the tabs below.
Reguired 1C
Required 2
Reguired 1A
Required 1R
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![690
Utilities expense
2,700
$ 143,550 $ 143,550
Totals
Note: Retained Earnings account balance was $23,000 on December 31 of the prior year.
Required:
1a. Prepare an income statement for the year.
1b. Prepare a statement of retained earnings for the year.
1c. Prepare a classified balance sheet at December 31.
2. Prepare the December 31 closing entries.
Complete this question by entering your answers in the tabs below.
Required 1A
Required 1B
Required 1C
Required 2
es
Prepare a statement of retained earnings for the year.
KARISE REPAIRS
Statement of Retained Earnings
For Year Ended December 31
Retained earnings, December 31 prior year
2$
Retained earnings, December 31 current year
Required 1A
Required 1C
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