A simplified balance sheet for Galaxy Cafe Inc. contain the following amounts at the end of 2019 and 2020. Galaxy Cafe Inc. Balance Sheet As at August 31 2020 2019 Assets Current Assets Cash $6,000 $9,300 Accounts Receivable $19,300 $8,600 Prepaid Rent $2,200 $1,700 Food & Beverage Inventory $31,500 $19,600 Total Current Assets $59,000 $39,200 Long-Term Assets Equipment $185,000 $163,000 Accumulated Depreciation $-27,000 $-16,200 Total Long-Term Assets $158,000 $146,800 Total Assets $217,000 $186,000 Liabilities Current Liabilities $23,100 $23,100 Long-Term Liabilities $28,000 $44,000 Total Liabilities $51,100 $67,100 Shareholders' Equity Common Shares $90,000 $69,000 Retained Earnings $75,900 $49,900 Total Shareholders' Equity $165,900 $118,900 Total Liabilities and Equity $217,000 $186,000 Assume current liabilities include only items from operations (e.g., accounts payable, taxes payable). Long-term liabilities include items from financing (e.g. bonds and other long-term liabilities). Note that the company did not sell any equipment and did not borrow any additional long-term liabilities throughout the year. Prepare the cash flow statement for 2020 using the indirect method. Assume no dividends were declared or paid in 2020. Do not enter dollar signs or commas in the input boxes. Use the negative sign for a decrease in cash. Galaxy Cafe Inc. Cash Flow Statement For the Year Ended August 31, 2020 Cash Flow from Operations Net Income Answer Adjustments for Non-Cash Items Depreciation Expense Answer Change in Current Assets and Current Liabilities Increase in Accounts Receivable Answer Increase in Prepaid Rent Answer Increase in Food & Beverage Inventory Answer Net Cash Provided (Used) by Operating Activities Answer Cash Flow from Investing Activities Purchase of Equipment Answer Net Cash Provided (Used) by Investing Activities Answer Cash Flow from Financing Activities Issuance of Common Shares Answer Repayment of Long-Term Liabilities Answer Net Cash Provided (Used) by Financing Activities Answer Net Increase (Decrease) in Cash Answer Cash at the Beginning of the Year Answer Cash at the End of the Year Answer
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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