Below is the Trial Balance for TK & Company Limited as at 31 December 2020. TK & Company Limited Trial Balance as at 31 December 2003 Cash at hand 2,000 Cash at bank 4,000 Land, cost 100,000 Motor vehicle at cost 10,000 Accumulated depreciation – Motor vehicle 2,000 Equipment at cost 20,000 Accumulated depreciation – (equipment) 4,000 Stock 1st January (opening stock) 1,000 Trade debtors 5,000 Provision for bad debts 2,000 Trade creditors 3,000 Sales 200,000 Purchases 110,000 Discount allowed 2,000 Discount received 1,000 Purchases returns (return outwards) 5,000 Sales returns (returns inwards) 10,000 Carriage inwards 6,000 Salaries 8,000 Salaries payable (accrued salaries) 15,000 Rent 1,800 Electricity 7,000 Bad debts 1,200 Capital 26,000 Long term bank loan 30,000 288,000 288,000 Additional Information: Closing stock at the end of the financial year was valued at GH₵20,000,000 Salaries of GH₵15,000,000 accrued or remained outstanding at the end of the year and were not recorded in the trial balance. Half of the rent paid is for the following financial year ending December 31, 2021. ● Depreciation is to be accounted for on the following basis: Land & Building 5% Straight-line method Motor vehicles 20% Straight-line method Equipment and furniture 10% Straight-line method Depreciate fixed assets by 20% on the cost at the end of the year 20% of trade debtors are expected to default a provision against bad debts should be made. ● Corporate tax rate is 25% Required: Prepare the following financial statements of TK Limited by relevant legislation and international reporting standards (IFRS): The Statement of Comprehensive Income for the year ended December 31, 2020. The Statement of Changes in Equity for the ended December 31, 2020. The Statement of Financial Position as at December 31, 2020.
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.
Below is the
TK & Company Limited Trial Balance as at 31 December 2003
|
Cash at hand |
2,000 |
|
|
Cash at bank |
4,000 |
|
|
Land, cost |
100,000 |
|
|
Motor vehicle at cost |
10,000 |
|
|
|
|
2,000 |
|
Equipment at cost |
20,000 |
|
|
Accumulated depreciation – (equipment) |
|
4,000 |
|
Stock 1st January (opening stock) |
1,000 |
|
|
Trade debtors |
5,000 |
|
|
Provision for |
|
2,000 |
|
Trade creditors |
|
3,000 |
|
Sales |
|
200,000 |
|
Purchases |
110,000 |
|
|
Discount allowed |
2,000 |
|
|
Discount received |
|
1,000 |
|
Purchases returns (return outwards) |
|
5,000 |
|
Sales returns (returns inwards) |
10,000 |
|
|
Carriage inwards |
6,000 |
|
|
Salaries |
8,000 |
|
|
Salaries payable (accrued salaries) |
|
15,000 |
|
Rent |
1,800 |
|
|
Electricity |
7,000 |
|
|
Bad debts |
1,200 |
|
|
Capital |
|
26,000 |
|
Long term bank loan |
|
30,000 |
|
|
288,000 |
288,000 |
Additional Information:
- Closing stock at the end of the financial year was valued at GH₵20,000,000
- Salaries of GH₵15,000,000 accrued or remained outstanding at the end of the year and were not recorded in the trial balance.
- Half of the rent paid is for the following financial year ending December 31, 2021.
|
● Depreciation is to be accounted for on the following basis: |
|
|
|
5% |
Straight-line method |
|
20% |
Straight-line method |
|
10% |
Straight-line method |
- Depreciate fixed assets by 20% on the cost at the end of the year
- 20% of trade debtors are expected to default a provision against bad debts should be made.
|
● Corporate tax rate is 25% |
|
|
|
|
Required:
Prepare the following financial statements of TK Limited by relevant legislation and international reporting standards (IFRS):
- The Statement of Comprehensive Income for the year ended December 31, 2020.
- The Statement of Changes in Equity for the ended December 31, 2020.
- The
Statement of Financial Position as at December 31, 2020.
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