anuary 2020 the following trial balance was extracted from the books of Yusit Credit RM Particulars Debit RM Capital 1 February 2019 Vehicles at cost 101,430 Equipment at cost Purchases and sales 35,000 80,000 284,680 503,520 Provision for depreciation at 1 February 2019: 21,000 35,000 650 Vehicles Equipment 1,340 Return inward and return outwards Finance expenses Stock at 1 February 2019 Vehicles expenses Rent, rates and insurance Office expenses Drawings Petty cash Wages and salaries Bad debts 1,220 25,570 4,930 7,420 21,940 23,550 200 95,370 1,240 83,210 14,880 680,550 680.550 18,950 Debtors and creditors Cash at bank ТОTAL ditional information as at 31 January 2020: RM lo. Particulars i. Stock valued at Insurance prepaid 29,750 340 ii. 420 ii. Goods taken from stock for own use 2,400 620 iv. Wages due v. Provision for doubtful debt required vj. Provision for depreciation is to be provided as follows: 30% straight line method reducing balance method Vehicles 25% Equipment
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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