Chapter3 PROBLEMS A. The following information is extracted from the general ledger of Super Massage Clinic on December 31, 200H, the end of its accounting period: Case 1: Cash Notes Payable Due from Customers Delivery Van Office Equipment Loan Payable Notes Receivable Due to Suppliers Furniture & Fixtures P 24,200 12,000 13,450 200,000 48,000 40,000 8,000 21,000 28,000 Case 2: Cash Accounts Receivable Aliow. for Impairment Loss Unused Office Supplies Prepaid Advertising Unexpired Insurance Furniture & Equipment Accumulated Depreciation Accounts Payable Notes Payable Accrued Interest Expense Accrued Interest Income Unearned Commission Salaries Payable Rental Receivable Repair Supplies Inventory P 68,900 36,500 1,200 2,350 12,000 6,500 76,000 7,600 32,000 16,500 1,200 2,340 11,000 8,000 15,000 4,000 REQUIRED: For each case above compute the owner's equity as at December.31, 200H The following information is available from the books of Nelson Trucking Company as of June 30, 200C, the end of its accounting period. P 500,000 25,000 267,000 48,000 36,000 12,450 76,000 25,000 12,000 8,450 Note: An additional investment of P 20,000 was made during the year. В. Nelson Capital, June 30, 200B Nelson Personal Trucking Service Income Rent Repairs & Maintenance Utilities Gas & Oil Insurance Rental Income Taxes & Licenses REQUIRED: Prepare the Statement of Changes in Owner's Equity. 75
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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