a. Prepare the Statement of Cash Flows for the year ended December 31, 2020 using the indirect method. b. Prepare the Statement of Cash Flows for the year ended December 31, 2020 using the direct method. c. Interpret the Statement of Cash Flows by explaining the main sources and uses of cash during the year.
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.
Please Sir Fast Answer..
![Lemon Zester Company's Balance Sheet for December 31, 2019 and the Income Statement
for 2020 are shown below.
Balance Sheet as of December 31,2019
Cash
Accounts receivable
Inventory
Property and equipment, net
Accounts payable
Note payable, long-term
Contributed earnings
Retained earnings
Additional Data for 2020:
Income Statement for 2020
Sales
Cost of goods sold
Wage expense
Interest expense
Other expenses
Net income
Sales were $13,000; $8,000 in cash was received from customers.
Bought new land for cash, $10,000.
Sold other land for its book value of $5,000.
Paid $1,000 principal on the long-term note payable and $1,000 in interest.
Issued new shares for $10,000 cash.
$1,000 of dividends were declared and paid.
Paid $5,500 on accounts payable.
No inventory purchases were made; other expenses were incurred on account.
All wages were paid in cash.
Other expenses were on account.
$10,000
5,000
12,000
20,000
$47,000
$10,000
5,000
20,000
12,000
$47,000
$13,000
3,000
3,000
1,000
500
$5,500
a. Prepare the Statement of Cash Flows for the year ended December 31, 2020 using the indirect
method.
b. Prepare the Statement of Cash Flows for the year ended December 31, 2020 using the direct
method.
c. Interpret the Statement of Cash Flows by explaining the main sources and uses of cash during
the year.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5a988332-3861-46e1-a609-02936ba41b02%2F355b3954-8d7d-491e-9a2e-82c23d6ab846%2Ffjmrto_processed.jpeg&w=3840&q=75)
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