Chart of Accounts 100 Cash 105 Accounts Receivable (All) 110 Supplies 115 Furniture and Equipment 200 Accounts Payable (All) 205 Bank Loan 200 DUN Com 210 HST Payable 240 HST Payable 215 HST Recoverable 300 K. Goldberg, Capital 305 K. Goldberg, Drawings 400 Fees Earned 500 Utilities Expense 505 Bank Charges 510 Rent Expense Transactions March 1 Cheque #30, paid monthly rent of $900 March 2 Purchase Invoice #100, bought hair salon supplies on account from Johnson's for $340 plus HST Sales Invoice #60, M. Swatakzy, performed a haircut for M. Swatazky on account for $35 plus HST March 3 Bank Debit Memo from the bank for service charges of $35 Cheque #31, paid Samson Beauty Supplies $113 on account March 4 $400 monthly automatic payment on the bank loan is transferred from the bank account March 5 The owner withdrew $700 worth of the business furniture and took it home for his personal use Purchase Invoice #100 from Union Energy for natural gas on account $170 plus HST March 6 Owner deposited $400 in business bank account from personal funds (additional investment in the business) March 7 Filed HST return to government for the month of February, Enclosed Cheque #32 for the remittance. (HST Payable Balance $1306.50) (HST Recoverable Balance $644.34)
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.
Step by step
Solved in 3 steps with 2 images
