an’s Dance Studio, Inc., performs adjusting entries every month, but closes its accounts only at year-end. The studio’s year-end adjusted trial balance dated December 31, 2019, appears below. (Bear in mind, the balance shown for Retained Earnings was last updated on December 31, 2018) JAN’S DANCE STUDIO. INC. ADJUSTED TRIAL BALANCE DECEMBER 31, 2019 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $171,100 Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,400 Prepaid studio rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000 Unexpired insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,200 Supplies . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . 500 Equipment. . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . 18,000 Accumulated depreciation: equipment . . . . . . . .. . . . . . . . $ 7,200 Notes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,200 Salaries payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000 Income taxes payable. . . . . . . . . . . .. . . . . . . . . . . . . . . . . . 6,000 Unearned studio revenue . . . . . . . . . . . . . . . . . . . . . . . . . . 8,800 Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . 100,000 Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000 Studio revenue earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165,000 Salary expense. . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . 85,000 Supply expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,900 Rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000 Insurance expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,900 Advertising expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 Depreciation expense: equipment . . . . . . . . . . . . . . . . . . . 1,800 Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 900 Income taxes expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,000 $344,200 $344,200 REQUIRED: a. Prepare the necessary Closing Entries at December 31, 2019. b. Prepare an After-Closing Trial Balance dated December 31, 2019.
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.
Jan’s Dance Studio, Inc., performs
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JAN’S DANCE STUDIO. INC. ADJUSTED TRIAL BALANCE DECEMBER 31, 2019 |
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Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
$171,100 |
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9,400 |
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Prepaid studio rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
3,000 |
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Unexpired insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
7,200 |
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Supplies . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . |
500 |
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Equipment. . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . |
18,000 |
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$ 7,200 |
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Notes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
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10,000 |
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Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
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3,200 |
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Salaries payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
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4,000 |
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Income taxes payable. . . . . . . . . . . .. . . . . . . . . . . . . . . . . . |
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6,000 |
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Unearned studio revenue . . . . . . . . . . . . . . . . . . . . . . . . . . |
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8,800 |
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Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . |
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100,000 |
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Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
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40,000 |
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Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
6,000 |
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Studio revenue earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
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165,000 |
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Salary expense. . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . |
85,000 |
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Supply expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
3,900 |
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Rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
12,000 |
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Insurance expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
1,900 |
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Advertising expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
500 |
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Depreciation expense: equipment . . . . . . . . . . . . . . . . . . . |
1,800 |
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Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
900 |
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Income taxes expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
23,000 |
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$344,200 |
$344,200 |
REQUIRED:
a. Prepare the necessary Closing Entries at December 31, 2019.
b. Prepare an After-Closing Trial Balance dated December 31, 2019.
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