2019 Ending Balances DEBITS CREDITS Cash 17,000 Marketable Securities 2,000 Accounts Rec. 14,000 Allowance for Bad Debt 2,000 Inventory 15,000 Prepaid Insurance 5,000 Land 30,000 Building 150,000 Accumulated Dep. - Building 45,000 Equipment 100,000 Accumulated Dep. - Equipment 20,000 Accounts Payable 9,000 Salaries Payable Unearned Revenue 2,000 Interest Payable Income Taxes Payable 3,000 Note Payable Bonds 100,000 Common Stock 50,000 Additional Pd-in-Capital 80,000 Retained Earnings 22,000 333,000 333,000 Complete the following jounral entries: Salaries are $2,200 per month (12 months of salaries expense must be booked). It is expected that one-half month will be owed on 12/31/20 because of when payday falls (therefore, 11.5 months of salaries have been paid and ½ month is still owed to the employees at year end). $56,000 in cash is borrowed on 9/30/20 by issuing a Note Payable. Interest is 8% per year. The bonds were sold at face value last December and pay interest on Dec. 31, 2020. 10,000 additional shares of stock were sold for $3 a share.
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.
| 2019 Ending Balances | ||
| DEBITS | CREDITS | |
| Cash | 17,000 | |
| Marketable Securities | 2,000 | |
| Accounts Rec. | 14,000 | |
| Allowance for |
2,000 | |
| Inventory | 15,000 | |
| Prepaid Insurance | 5,000 | |
| Land | 30,000 | |
| Building | 150,000 | |
| Accumulated Dep. - Building | 45,000 | |
| Equipment | 100,000 | |
| Accumulated Dep. - Equipment | 20,000 | |
| Accounts Payable | 9,000 | |
| Salaries Payable | ||
| Unearned Revenue | 2,000 | |
| Interest Payable | ||
| Income Taxes Payable | 3,000 | |
| Note Payable | ||
| Bonds | 100,000 | |
| Common Stock | 50,000 | |
| Additional Pd-in-Capital | 80,000 | |
| 22,000 | ||
| 333,000 |
333,000 |
Complete the following jounral entries:
- Salaries are $2,200 per month (12 months of salaries expense must be booked). It is expected that one-half month will be owed on 12/31/20 because of when payday falls (therefore, 11.5 months of salaries have been paid and ½ month is still owed to the employees at year end).
- $56,000 in cash is borrowed on 9/30/20 by issuing a Note Payable. Interest is 8% per year.
- The bonds were sold at face value last December and pay interest on Dec. 31, 2020.
- 10,000 additional shares of stock were sold for $3 a share.
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