and financlal statements LO P1, Individuals who pay tultion directly to s prepald expenses and unearned ollows, along with descriptions of ear-end. h. Two courses will start Immediately The cliont nald 12 500 cach in
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.
![Required information
Problem 3-3A (Statle) Preparlng adjusting entrles, adjusted trlal balance, and financlal statements LO P1,
P2, P3, P4, P5
[The following information applies to the questions displayed below]
Wells Technical Institute (WTI), a school owned by Tristana Wells, provides training to Individuals who pay tuition directiy to
the school. WTI also offers training to groups in off-site locations. WTI Initially records prepald expenses and uneamed
revenues In balance sheet accounts. Its unadjusted trial balance as of December 31 follows, along with descriptions of
Items a through hthat require adjusting entries on December 31.
Addıtional Information
a. An analysis of WT's Insurance policles shows that $2,400 of coverage has explred.
b. An Inventory count shows that teaching supplies costing $2.800 are avallable at year-end.
C. Annual depreclation on the equlpment is $13,200.
d. Annual depreclation on the professional library is $7,200.
e. On September 1, WTI agreed to do five training courses for a client for $2,500 each. Two courses will start Immediately
and finish before the end of the year. Three courses will not begin until next year. The client pald $12,500 cash in
advance for all five training courses on September 1, and WTI credited Unearned Revenue.
f. On October 15, WTI agreed to teach a four-month class (beginning Immediately) for an executive with payment due at
the end of the class. At December 31, $7,500 of the tuition revenue has been earned by WTI.
g. WTI's two employees are pald weekly. As of the end of the year, two days' salarles have accrued at the rate of $100 per
day for each employee.
h. The balance In the Prepald Rent account represents rent for December.
WELLS TECHNICAL INSTITUTE
Unadjusted Trial Balance
December 31
Debit
$ 34,000
Credit
Cash
Accounts receivable
Teaching supplies
Prepaid insurance
Prepaid rent
Professional library
Accumulated depreciation-Professional library
Equipment
Accumulated depreciation-Equipment
Accounts payable
Salaries payable
8,00e
12,0ee
3,000
35,00e
$ 10,000
15,e00
26,000
Unearned revenue
12,5e0
T. Wells, Capital
90,eee
T. Wells, Withdrawals
Tuition revenue
5e,00e
123,9e0
40,eee
Training revenue
Depreciation expense-Professional library
Depreciation expense-Equipment
Salaries expense
Insurance expense
Rent expense
Teaching supplies expense
Advertising expense
Utilities expense
50,000
33,00e
e
6,00e
6,400
Totals
$ 317,400
$ 317,400](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4e7d1569-7d45-4428-801b-0f8bcbd855e8%2Fc776416a-e3ff-47d9-96cc-36ec9f3a09c6%2Fuma3x3_processed.png&w=3840&q=75)
Income statement shows the revenue earned and expenses incurred . It calculated the profit or loss of the business.
The expenses and revenue amounts are taken from the trial balance and adjusted as per the adjusting entries
| Transaction | General Journal | Debit | Credit |
| a | Insurance expenses | $ 2,400 | |
| Prepaid insurance | $ 2,400 | ||
| b | Teaching Supplies Expense | $ 5,200 | |
| Teaching Supplies | $ 5,200 | ||
| c | Depreciation expense- Equipment | $ 13,200 | |
| Accumulated Depreciation- Equipment | $ 13,200 | ||
| d | Depreciation expense-- Professional Library | $ 7,200 | |
| Accumulated Depreciation- Professional Library | $ 7,200 | ||
| e | Unearned Revenue | $ 5,000 | |
| Training Revenue | $ 5,000 | ||
| f | Accounts Receivable | $ 7,500 | |
| Tuition Revenue | $ 7,500 | ||
| g | Salaries Expenses | $ 400 | |
| Salaries Payable | $ 400 | ||
| h | Rent Expense | $ 3,000 | |
| Prepaid Rent | $ 3,000 |
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