Balance Sheet of BCR Ltd. as on 31st March, 2016 appears as below: 1. Equity and Liabilities (1) Shareholders' Funds (a) Share Capital : 1,50,000 Equity Shares of $10 each fully paid 15,00,000 5,000 11% Preference Shares of $100 each fully paid 5,00,000 (b) Reserves and Surplus: Surplus A/c (Dr. Balance) (-) 16,40,000 (2) Non-current Liabilities Secured Loans: 11% Debentures 5,00,000 Bank Overdraft 6,30,000 Unsecured Loans 5,00,000 (3) Current Liabilities 5,00,000 Other Current Liabilities : Interest Accrued on Debentures 1,10,000 Interest Accrued on Unsecured Loans 1,50,000 Total Equity and Liabilities 27,50,000 II. Assets (1) Non-current Assets Fixed Assets less Depreciation Reserve 15,00,000 5,00,000 (2) Current Assets Stock and Stores 6,00,000 Receivables 14,50,000 Other Current Assets 2,00,000 Total Assets 27,50,000 A scheme of reconstruction has been agreed amongst the shareholders and the creditors with the following salient features : (a) Interest due on unsecured loans is waived. (b) 50% of the interest due on the debentures is waived. (c) The 11% preference shareholders' rights are to be reduced to 50% and converted into 15% Debentures of $100 each. (d) Current liabilities would be reduced by $50,000 on account of provision no longer required. (e) The banks agree to the arrangement and to increase the cash credit/overdraft limits by $1,00,000 upon the shareholders agreeing to bring in a like amount by way of new equity. (f) Besides additional subscription as above, the equity shareholders agree to convert the existing equity shares into new 10 rupees shares of total value $5,00,000. (g) The debit balance in the Profit and Loss Account is to be wiped out, $2,60,000 provided for doubtful debts and the value of fixed assets increased by $4,00,000. Redraft the Balance Sheet of the company based on the above scheme of reconstruction.
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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