3. Mr Jamil, a trader, completed a year's trading on 31 October 2020. The following balances were extracted from the business records: Particulars Debit RM Credit RM Purchases and Sales 52,650 160,720 340 100,000 140,000 30,000 75,000 Sales returns and purchases returns Land 1,213 Machines Office equipment Vehicles Provision for depreciation at 1 November 2019: Machines 28,000 16,800 28,000 Office equipment Vehicles Office expenses Cash in hand 11,500 175 Selling expenses Drawings Wages Stock at 1 Nov 2019 Provision for doubtful debts as at 1 Nov 2019 8,820 6,000 48,000 2,500 650 Debtors and creditors 14,500 2,370 240 8,600 Repairs Bad debts Jamil - Capital account as at 1 Nov 2019 Cash at bank 251,512 3,400 TOTAL 495,495 495,495 Mr Jamil also provides the following information at 31 October 2020: i. Stock was valued at RM2,750 ii. The provision for doubtful debts should be maintained at 5% of debtors. ii. Wages accrued amounted to RM1,500 iv. Office expenses prepaid amounted to RM342
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.
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