Business Allen Interiors Incorporated is a leading manufacturer and retailer of home furnishings in the United States and abroad. The following is adapted from Business Allen's June 30, 2019, trial balance. (The amounts shown represent millions of dollars.) Accounts Payable Accounts Receivable Cash Common Stock Equipment Inventory Notes Payable (long-term) Notes Payable (short-term) Prepaid Rent Retained Earnings Salaries and Wages Payable Software Assume that the following events occurred in the following quarter. a. Paid $55 cash for additional inventory. b. Issued additional shares of common stock for $45 in cash. Beginning Balance c. Purchased equipment for $170; paid $80 in cash and signed a note to pay the remaining $90 in two years. d. Signed a short-term note to borrow $15 cash. e. Conducted negotiations to purchase a sawmill, which is expected to cost $38. Ending Balance 4. Summarize the journal entry effects from part 3 using T-accounts. Use the June 30, 2019, ending balances as the beginning balances for the July-September 2019 quarter. (Enter your answers in millions (ie, 10,000,000 should be entered as 10).) Debit Beginning Balance Ending Balance Debit Beginning Balance Ending Balance Ending Balance Debit Debit Beginning Balance Ending Balance Beginning Balance Ending Balance Debit Notes Payable (short-term) Debit Beginning Balance Cash Inventory Equipment Accounts Payable Common Stock Credit Credit Credit $ 132 18 116 Credit 31 315 152 175 Credit 2 Credit 33 341 28 Debit Beginning Balance Ending Balance Debit Beginning Balance Ending Balance Debit Beginning Balance Ending Balance Beginning Balance Ending Balance Accounts Receivable Debit Ending Balance Salaries and Wages Payable Debit Beginning Balance Debit Ending Balance Prepaid Rent Beginning Balance Software Credit Notes Payable (long term) Credit Credit Retained Earnings Credit Credit Credit
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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