Although Sahra now pays Stone & Co Accounting Specialists Pty Ltd to manage the accounting function of the business, she still likes to prepare a few journals when she has time. The following general journal entries for the business ‘Vacation’ were prepared by Sahra for transactions occurring in October, however she needs your assistance in posting them to the General Ledger. Sahra has posted the opening balances (where required) into the general ledger and they are correct. Required: Post the General Journals recorded below to the General Ledger provided on the following page. Remember to foot each ledger to determine the ledger balance. Hints to assist in completing the ledgers: Do not delete the opening balances given. The ledgers are formatted using tables, therefore it is best to navigate through the ledgers using the ‘tab’ function. When using tables, it is often easier to click on the “¶” function so you can see the formatting. It is quite acceptable to shorten account names i.e. Cash at Bank becomes CAB. Date Details Debit ($) Credit ($) 1 October Sewing Table 750 Capital 750 (Sahra contributed a sewing table from her home to the business) 8 October Electricity Expense 495 Cash at Bank 495 (business paid for Electricity expense) 14 October Clothing Racks 2 000 Cash at Bank 500 Accounts Payable 1 500 (Vacation purchased four new clothing racks to display beachwear at local sailing and surfing events) 21 October Interest Expense 60 Cash at Bank 60 (Interest expense paid on loan) 24 October Cash at Bank 4 500 Beachwear Sales 4 500 (Sales of beachwear at local surfing event) 31 October Accounts Payable 532 Cash at Bank 532 (Paid for supplies purchased in September) Post the journals from above to the General Ledger provided below. All ledgers below must be footed (the closing balance must be made clear either by way of ‘c/d’ / ‘b/d’ notation, the wording ‘balance’ next to the amount, highlight the balance or with a circle around the balance). Cash at Bank (CAB) October 1 Balance 16 000 Sewing Table Clothing Racks October 1 Balance 1 200 Accounts Payable October 1 Balance 2 000 Capital October 1 Balance 43 000 Beachwear Sales October 1 Balance 83 487 Interest Expense October 1 Balance 180 Electricity Expense October 1 Balance 1 485
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.
Although Sahra now pays Stone & Co Accounting Specialists Pty Ltd to
Required:
Post the General Journals recorded below to the General Ledger provided on the following page. Remember to foot each ledger to determine the ledger balance.
Hints to assist in completing the ledgers:
- Do not delete the opening balances given.
- The ledgers are formatted using tables, therefore it is best to navigate through the ledgers using the ‘tab’ function.
- When using tables, it is often easier to click on the “¶” function so you can see the formatting.
- It is quite acceptable to shorten account names i.e. Cash at Bank becomes CAB.
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Date |
Details |
Debit ($) |
Credit ($) |
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1 October |
Sewing Table |
750 |
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Capital |
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750 |
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(Sahra contributed a sewing table from her home to the business) |
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8 October |
Electricity Expense |
495 |
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Cash at Bank |
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495 |
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(business paid for Electricity expense) |
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14 October |
Clothing Racks |
2 000 |
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Cash at Bank |
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500 |
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Accounts Payable |
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1 500 |
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(Vacation purchased four new clothing racks to display beachwear at local sailing and surfing events) |
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21 October |
Interest Expense |
60 |
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Cash at Bank |
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60 |
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(Interest expense paid on loan) |
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24 October |
Cash at Bank |
4 500 |
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Beachwear Sales |
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4 500 |
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(Sales of beachwear at local surfing event) |
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31 October |
Accounts Payable |
532 |
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Cash at Bank |
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532 |
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(Paid for supplies purchased in September) |
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Post the journals from above to the General Ledger provided below. All ledgers below must be footed (the closing balance must be made clear either by way of ‘c/d’ / ‘b/d’ notation, the wording ‘balance’ next to the amount, highlight the balance or with a circle around the balance).
Cash at Bank (CAB)
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October 1 |
Balance |
16 000 |
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Sewing Table
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Clothing Racks
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October 1 |
Balance |
1 200 |
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Accounts Payable
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October 1 |
Balance |
2 000 |
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Capital
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October 1 |
Balance |
43 000 |
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Beachwear Sales
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October 1 |
Balance |
83 487 |
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Interest Expense
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October 1 |
Balance |
180 |
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Electricity Expense
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October 1 |
Balance |
1 485 |
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