After several months of planning, Jasmine Worthy started a haircutting business called Expressions. Thefollowing events occurred during its first month of business.a. Aug. 1 Worthy invested $3,000 cash and $15,000 of equipment in Expressions.b. 2 Expressions paid $600 cash for furniture for the shop.c. 3 Expressions paid $500 cash to rent space in a strip mall for August.d. 4 Purchased $1,200 of equipment on credit for the shop (recorded as accounts payable).e. 15 Expressions opened for business on August 5. Cash received from haircutting services in thefirst week and a half of business (ended August 15) was $825.f. 16 Expressions provided $100 of haircutting services on credit.g. 17 Expressions received a $100 check for services previously rendered on credit.h. 18 Expressions paid $125 cash to an assistant for hours worked for the grand opening.i. 31 Cash received from services provided during the second half of August was $930.j. 31 Expressions paid $400 cash toward the accounts payable entered into on August 4.k. 31 Worthy made a $900 cash withdrawal from Expressions for personal use. Prepare a balance sheet as of August 31.
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.
After several months of planning, Jasmine Worthy started a haircutting business called Expressions. The
following events occurred during its first month of business.
a. Aug. 1 Worthy invested $3,000 cash and $15,000 of equipment in Expressions.
b. 2 Expressions paid $600 cash for furniture for the shop.
c. 3 Expressions paid $500 cash to rent space in a strip mall for August.
d. 4 Purchased $1,200 of equipment on credit for the shop (recorded as accounts payable).
e. 15 Expressions opened for business on August 5. Cash received from haircutting services in the
first week and a half of business (ended August 15) was $825.
f. 16 Expressions provided $100 of haircutting services on credit.
g. 17 Expressions received a $100 check for services previously rendered on credit.
h. 18 Expressions paid $125 cash to an assistant for hours worked for the grand opening.
i. 31 Cash received from services provided during the second half of August was $930.
j. 31 Expressions paid $400 cash toward the accounts payable entered into on August 4.
k. 31 Worthy made a $900 cash withdrawal from Expressions for personal use. Prepare a
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