ATHENS Company began operations in 2021. The company purchases computer equipment from manufacturers and then sells them to retail stores. During the year, the bookkeeper only used a check register to record all cash receipts and disbursements. No other journals were used. The following is a summary of cash receipts and disbursements made by ATHENS during the year: Cash receipts: • Sale of ordinary shares, P50,000 • Collections from customers, P320,000 • Borrowed from a local bank on April 1, signed a note requiring principal and interest at 12% to be paid on March 31, 2022, P40,000 Cash disbursements: • Purchase of merchandise, P220,000 • Payment of salaries, P80,000 • Purchase of equipment, P30,000 • Payment of rent for the office building. P14,000 • Payment of miscellaneous expenses, P10,000 As a CPA who recently passed the board examination, you were engaged to prepare the financial statements at December 31, 2021. The following additional information was provided to you: a. Amounts still owed by customers to ATHENS at year-end, P22,000. Of this amount, it was anticipated that P3,000 would be uncollectible. There were no actual bad debts written off in 2021. b. Amounts still owed by ATHENS to suppliers of merchandise, P30,000. c. Cost of merchandise still on hand at year-end, P50,000. d. Salaries owed to employees at year-end, P5,000. e. On December 1, P3,000 rent was paid to the owner of the office building used by the ATHENS. This represented rent for the period December 2021 to February 2022. f. The equipment was purchased on January 1 and had a 10-year useful life with no salvage value. Straight-line method of depreciation was used.
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.
How much is ATHENS' accrual basis total operating expenses during the year? (EXCLUDE INTEREST EXPENSE)
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