B Otse, a sole trader, extracted the following trial balance from his books at the close of business on 31 July 2018. Debit Credit Purchases 65, 240 Sales 137, 425 Capital 45, 845 Bank 20, 000 Cash 200 Discount allowed 2, 400 Returns Inwards 3, 580 Returns outwards 1, 400 Carriage inwards 2, 410 Rent 6, 780 Provision for doubtful debts 500 Office furniture 5, 600 Motor van 15, 000 Accounts Receivables 12, 300 Accounts Payables 10, 500 Drawings 19, 600 Salaries and wages 42, 000 General expenses 560 Total 195, 670 195, 670 Notes i. Closing inventory 31 March 2017 P6, 500 ii. Accrued salaries and wages P5, 000 iii. Prepaid rent P800 iv. Provide for depreciation as follows: Office furniture P560; Motor van P3, 750 REQUIRED: a. Prepare a Statement of Comprehensive Income for the year ended 31 July 2018. b. Prepare a Statement of Financial Position as at 31 July 2018.
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.
SECTION B
B Otse, a sole trader, extracted the following
business on 31 July 2018.
Debit | Credit | |
Purchases | 65, 240 | |
Sales | 137, 425 | |
Capital | 45, 845 | |
Bank | 20, 000 | |
Cash | 200 | |
Discount allowed | 2, 400 | |
Returns Inwards | 3, 580 | |
Returns outwards | 1, 400 | |
Carriage inwards | 2, 410 | |
Rent | 6, 780 | |
Provision for doubtful debts | 500 | |
Office furniture | 5, 600 | |
Motor van | 15, 000 | |
12, 300 | ||
Accounts Payables | 10, 500 | |
Drawings | 19, 600 | |
Salaries and wages | 42, 000 | |
General expenses | 560 | |
Total | 195, 670 | 195, 670 |
Notes | |||
i. Closing inventory 31 March 2017 P6, 500 | |||
ii. Accrued salaries and wages P5, 000 | |||
iii. Prepaid rent P800 | |||
iv. Provide for |
|||
Motor van P3, 750 | |||
REQUIRED: | |||
a. Prepare a Statement of Comprehensive Income for the year ended 31 July 2018. | |||
b. Prepare a |
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