3. The following information is taken from WaterLake Company's Trial balance: WaterLake Company Adjusted Trial Balance January 31, 20x1 Асcount Debit Credit Supplies 1,700 Accounts Receivable 3,800 Prepaid Insurance Accounts Payable 6,800 1,900 Unearned Service Revenue 3,500 Service Revenue 4,200 Supplies Expense Insurance Expense 1,200 3,100 WaterLake Company follows a December 31 fiscal year-end. During the month of January, Cash of $2,800 was received from customers, of which $1,500 was for services performed in January and $1,300 was cash collection from customers for prior credit sales. Also during the month of January, WaterLake Company completed services totaling $900 for customers that paid in advance in December of the previous year. The entry corresponding to this transaction was recorded when the services were completed (i.e. its effects are incorporated in the above adjusted trial balance). What was the balance of Accounts Receivable on January 1, 20x1? (There were no write-offs of uncollectible accounts.) (CPA Adapted)
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.
Accounts receivable are those customer accounts to whom business has made credit sales on account and amount has not been received yet. This is one of the current asset of the business.
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