and their balances as at December 31, 2018, its second year of operation: The books of Laredo Placement Agency showed among others the following accounts Cash Accounts Receivable Allowance for bad Debts Notes Receivable Prepaid Insurance Car Accumulated Depreciation Accounts Payable Notes Payable Laredo, Capital Laredo, Personal Placement Income Rent Expense Salaries Expense Interest Income Interest Expense Gas & Oil Expense Supplies Expense 80,000 30,000 1,500 6,500 3,750 365,000 22,500 25,000 15,000 334,050 35,000 380,000 76,500 168,000 2,500 1,800 11,500 2,500 The following information were given for you to be able to prepare the adjusting entries as of December 31. ₁. P1,000 worth of supplies are still unused at the end of the year. b. The car was purchased on March 31 of the previous year with an estimated salvage value of P65,000.Hint: Determine annual depreciation based on the accumulated depreciation provided in the year 2018. c. Prepaid insurance represents a balance of a one year premium expiring Feb. 28, 2019. d. The note was received from the customer on November 16, 2018 for 60 days at 24% interest. Salaries of 4 workers and clerks amounted to P800 per day from Monday to Saturday and payable every Monday. The next payroll date is January 4 covering the previous week payroll from December 28 to January 2. An advance payment for placement fee of P30,000 was included in the income account. The company makes it a policy of providing bad debts based on 1% of the yearly revenue. Required: Journalize the adjusting entries.
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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