Create a name for the owner of the company and give the business a name that reflects the operations of the organization. Record the transactions stated above in the general journal. Post the transactions to the general ledger and balance off each account Extract a trial balance on August 31st. Prepare an Income Statement for the month ended August 31st, the owner’s equity statement and a Balance Sheet as at that date
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.
Assume that a relatively new company you and you group members are involved with has presented you with the following transactions for 2021 from the books of the business. This company operates one bank account to reflect all cash and cheque transactions. You are now required to read these transactions carefully then prepare the relevant documents and books as outlined in the requirements below.
1 Aug Started business with $150, 000 in the bank
3 Aug Bought supplies on credit from Right Way Manufacturers
24 Boxes Air Filter $720.00 per box
96 Bottles fuel injector cleaner $200.00 per bottle
48 Boxes Spark Plug $300.00 per box
36 Boxes Brake Shoe $580.00 per box
24 Boxes Disc Pads $400.oo per box
5 Aug Provided services for cash less 10% discount
12 small motorbike engines $350.00 per engine
6 large motorbike engines (full service) $950.00 per engine
8 medium size motorbike engines (full service) $800.00 per engine
7 Aug Paid Rent by cheque $5,000.00
10 Aug Paid Wages by cheque $8,000.00
10 Aug Bought Fixtures from CT Limited $3,500.00
paying by cash
11 Aug Provided services on credit to Auto Care.
24 small motorbike engines $350.00 per engine
8 large motor bike engines (partial service) $650.00 per engine
12 medium size motorbike engine (partial service) $550.00 per engine
12 Aug Bought Fixtures on credit from CT Ltd $8,000.00
13 Aug Received a loan from NBC cash $25,000.00
14 Aug Provided services on credit to P&S Auto
18 Large motorbike engines (full service) $950.00 per engine
12 medium size motor bike engines $650.00 per engine
24 medium size motorbike engines $550.00 per engine
20 small motorbike engines $350.00 per engine
21 Aug Paid CT Ltd by cheque $8,000.00
22 Aug Paid wages cash $8,000.00
23 Aug Paid Right Way Manufacturer the amount owing to them
by cheque, they allowed us a 15% discount
27 Aug P&S Auto paid the amount owing by them in
Cash less 10 % discount
27 Aug Electricity paid by cash $1,500.00
To avoid duplication of account names and the use of improper account names, the company has provided the following list of accounts used to record its transactions as extracted from its chart of accounts:
Capital
Cash
Supplies
J Manufacturers
Service Revenue
Discount Allowed
Rent Expense
Wages Expense
Supplies Expense
Fixtures
Auto Care
Loan NBC
Discount Received
Electricity Expense
Drawings
Requirements:
Create a name for the owner of the company and give the business a name that reflects the operations of the organization.
Record the transactions stated above in the general journal.
Extract a
Prepare an Income Statement for the month ended August 31st, the owner’s equity statement and a
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