Balances in T-accounts New balances in T-accounts New balances in T-accounts BEFORE adjusting entries AFTER adjusting entries are written & posted AFTER closing entries are written & posted are written & posted Account titles Unadjusted Adjusted Post Closing Trial Balance Trial Balance Trial Balance DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT 56,140 24,700 56,140 24,700 380 3,667 4,200 40,000| Cash Accounts Receivable Supplies Prepaid Insurance Prepaid Rent Equipment Accumulated Deprec| Accounts Payable Notes Payable Interest Payable Income Taxes Payable Salaries Payable Unearned Service Revenue Common Stock Retained Earnings Dividends Service Revenue Supplies Expense Depreciation Expense Insurance Expense| Salaries Expense Advertising Expense Utilities Expense Interest Expense Rent Expense Income Tax Expense| Totals 830 4,000 8,400 40,000 600 3,350 32,000 4,200 32,000 160 4,775 3,675 10,910 62,300 3,430 10,910 62,300 3,430 6,200 6,200 58,430 58,430 3,750 600 333 28,175 2,350 850 160 4,200 4,775 180,480 3,300 24,500 2,350 170,420 170,420 180,480
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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