A,B,C were three partners sharing profit and losses in the ratio of 3:2:1 Statement of financial position as at 31st December 2011 TZS “000" TZS “000" Bank balance 2,700 | Creditors 17,300 Stock 8,400 Bills payable 3,400 Debtors 7,000 Reserve fund 6,300 Provision for bad debt (350) 6,650 Capitals Bills receivable 2,400 A 8,000 Motor vehicle 6250 B 5,000 Land and buildings 17,300 C 3.000 16,000 Patents 4,300 | A'S Loan 5,000 Total 48,000 Total 48,000 It was decided to admit “ D" as partner for one sixth share in the future profit on the condition that he brings TZS 6,000,000 by way of capital and TZS 10,000,000 by the way of loan at 5 percent interest for a period of 5 years. Before admission the following adjustments are to be made;- 1. Goodwill to be credited to the old partners on the basic of their share of profits by raising goodwill account equal to twice the average of the profits of the three years which were TZS 10,200,000 TZS 12,300,0000 TZS 14,400,000 respectively. 2. Value of motor vehicle and stock to be reduced by 20 percent and the land and buildings to be rais to 20,300,000 3. The amount of bad debts provision to be made equal to seven and a half percent of debtors. %% 4. Patents to be written down by TZS 2,295,000 5. The amount of reserve funds to be credited to the old partners according to the share of profits. Required: show capita accounts of partners of partners, revaluation account and statement of financial position after admission of D.
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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