Carter Stark started Gulf Corp. on October 1, 2014. The adjusted trial balance shown below has been prepared for Gulf Corp. as of October 31, 2014. Use this information to prepare the income statement and statement of changes in equity for the month ended October 31 along with the October 31 balance sheet. Gulf Adjusted Trial Balance (select one) Income Statement (select one) October 31, 2014 Debit Credit Accumulated depreciation, furniture 10,500 Accumulated depreciation, trucks 16,500 Advertising expense 35,500 Advertising payable 35,000 Bonds payable 150,000 Commissions earned 121,500 Consulting revenue earned 88,500 Depreciation expense, furniture 10,500 Depreciation expense, trucks 16,500 Dividends 37,500 Furniture 152,500 Interest earned 14,000 Interest expense 39,500 Interest receivable. 26,500 Prepaid rent 41,000 Property taxes expense 21,500 Property taxes payable. 12,500 Rent expense 56,000 Share capital 179,500 Short-term notes payable 116,500 Supplies 76,000 Trucks 231,500 Totals 744,500 744,500 (select one) Statement of Changes in Equity (select one) (select one) Balance Sheet (select one) Share Retained Tota Capital Earnings Equi
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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