A summary of transactions undertaken by Wellworth Stores during the month of January 2018 are as follows: Date Transactions 2/1 Credit purchases form Allan Enterprise $72,000 (GST inclusive) 3/1 Credit sales to Jacky $36,000 (GST inclusive) 5/1 Cash sales $8,100 (GST inclusive) 7/1 Received from debtors for credit sale made in December 2017 $18,000 (GST inclusive) 11/1 Paid Allan Enterprise for credit purchases made on 2/1/2018 (GST inclusive) 14/1 Cash purchases $45,000 (GST inclusive) 16/1 Paid wages $27,000 20/1 Paid for advertisement $19,800 (GST inclusive) 21/1 Cash sales $63,000 (GST inclusive) 22/1 Paid insurance premium $4,050 (GST inclusive) 23/1 Cash sales received by EFTPOS card $90 (GST inclusive) 25/1 Purchased of office equipment by cash $2,070(GST inclusive) 26/1 Credit purchase $34,500 (GST inclusive) 28/1 Office rent for next 6 months paid in advance $37,800 29/1 Cash drawings by owner $4,590 30/1 Bank charges for the month of January $1,530 31/1 Cash sales $27,000 (GST inclusive) Wellworth Stores files monthly GST returns Required: Determine GST receivable or payable to the Inland Revenue Department if Wellworth Stores used: The payment basis The invoice basis The hybrid basis
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.
A summary of transactions undertaken by Wellworth Stores during the month of January 2018 are as follows:
|
Date |
Transactions |
|
2/1 |
Credit purchases form Allan Enterprise $72,000 (GST inclusive) |
|
3/1 |
Credit sales to Jacky $36,000 (GST inclusive) |
|
5/1 |
Cash sales $8,100 (GST inclusive) |
|
7/1 |
Received from debtors for credit sale made in December 2017 $18,000 (GST inclusive) |
|
11/1 |
Paid Allan Enterprise for credit purchases made on 2/1/2018 (GST inclusive) |
|
14/1 |
Cash purchases $45,000 (GST inclusive) |
|
16/1 |
Paid wages $27,000 |
|
20/1 |
Paid for advertisement $19,800 (GST inclusive) |
|
21/1 |
Cash sales $63,000 (GST inclusive) |
|
22/1 |
Paid insurance premium $4,050 (GST inclusive) |
|
23/1 |
Cash sales received by EFTPOS card $90 (GST inclusive) |
|
25/1 |
Purchased of office equipment by cash $2,070(GST inclusive) |
|
26/1 |
Credit purchase $34,500 (GST inclusive) |
|
28/1 |
Office rent for next 6 months paid in advance $37,800 |
|
29/1 |
Cash drawings by owner $4,590 |
|
30/1 |
Bank charges for the month of January $1,530 |
|
31/1 |
Cash sales $27,000 (GST inclusive) |
Wellworth Stores files monthly GST returns
Required: Determine GST receivable or payable to the Inland Revenue Department if Wellworth Stores used:
- The payment basis
- The invoice basis
- The hybrid basis
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