7.Prepare Trading and Profit and Loss Account for the year ended 31st March, 2015 and Balance Sheet on that date in the books of Mr. Maroti considering following adjustments. Trial Balance is given below: Trial Balance for the year ended 31" March, 2015 Credit Balances Debit Balances Amt Amt To Opening Stock To Salary & Wages To Cash in hand To Purchases 35,000 By Sales 4,200 | Discount 10,000 Creditors 2,25,200 | Bank Overdraft 13,600 | Interest on Investment 12,000 Capital 6,000 2,000 3,000 8,000 4,000 20,000 40,000 6,000 12,000 21,000 3,30,000 4,000 20,000 10,000 8,000 1,00,000 To Sundry expenses To Wages To Bills Receivable To Travelling expenses To Bad debts To Factory expenses To Commission To Investment To Debtors To Tools To Furniture To Goodwill 4,72,000 To Building 50,000 4,72,000 Adjustments: 1. Closing stock - Cost price 40,000 and market price 745,000 2.Goods withdrawn for personal use of 1,200 3.Uninsured Goods destroyed by fire 12,000 4.Write off Bad debts 450 5.Outstanding expenses : Salary and wages 800, Rent 1,200 6.Depreciate building by 7.5% p.a. (GP=1,03,000;NP=70,000;B/S=2,00,800)
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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