a. b. Exercise 3-10 (Algo) Analyzing adjusting entries using accounting equation LO P1, P3, P4 For each of the above separate cases, analyze each adjusting entry by showing its effects on the accounting equation- specifically, identify the accounts and amounts (including (+) increase or (-) decrease) for each transaction or event. C. d. e. a. Wages of $8,000 are earned by workers but not paid as of December 31. b. Depreciation on the company's equipment for the year is $11,320. c. The Supplies account had a $470 debit balance at the beginning of the year. During the year, $5,582 of supplies are purchased. A physical count of supplies at December 31 shows $608 of supplies available. f. d. The Prepaid Insurance account had a $5,000 balance at the beginning of the year. An analysis of insurance policies shows that $3,300 of unexpired insurance benefits remain at December 31. e. The company has earned (but not recorded) $500 of interest revenue for the year ended December 31. The interest payment will be received 10 days after the year-end on January 10. f. The company has a bank loan and has incurred (but not recorded) interest expense of $4,000 for the year ended December 31. The company will pay the interest five days after the year-end on January 5. Assets = = = = Liabilities
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.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
