Dash (Pty) Ltd provided the following information that was extracted from the financial records for the year ended 31 December 2021. Relevant financial information are shown below.
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.
Dash (Pty) Ltd provided the following information that was extracted from the financial records for the year ended 31 December 2021. Relevant financial information are shown below.
Information from the statement of financial position as at 31 December:
|
2021 R |
2020 R |
|
| Land and buildings at cost | 620 000 | 520 000 |
| Equipment at carrying amount | 268 000 | 343 000 |
| -Cost | 354 000 | 441 000 |
| - |
(86 000) | (98 000) |
| Fixed deposits | 70 000 | 100 000 |
| Inventory | 66 000 | 100 00 |
| Debtors control | 64 000 | 70 000 |
| Bank – favourable (debit) balance | 86 000 | ----- |
| Prepaid expense – Rent | ----- | 6 000 |
| Creditors control | 26 000 | 48 000 |
| Bank overdraft – credit balance | ----- | 6 000 |
| SARS - tax payable | 22 000 | 18 000 |
| Shareholders – dividends payable | 30 000 | 75 000 |
| Interest payable | 10 000 | 12 000 |
| Ordinary share capital | 850 000 | 750 000 |
| 96 000 | 30 000 | |
| Long term borrowings | 140 000 | 200 000 |
Extract of items shown on the statement of
| R | |
| Interest income on fixed deposit | 30 000 |
| Depreciation | 38 000 |
| Loss on sale of equipment | 1 000 |
| Interest on long term borrowings | 32 000 |
| Income tax expense | 86 000 |
| Profit for the year | 141 000 |
Additional information:
1. Inventory is disclosed at cost.
2. Land has not been revalued in the current financial year.
3. An extension was added to the building and completed in the current financial year. All building costs were paid for in cash. Buildings are not depreciated.
4. Interest on the long term loan is not capitalised.
5. No equipment was purchased during the current financial year but some equipment was sold during the year for cash.
6. Dividends for the year as shown in the statement of changes in equity was R75 000.
Required:
Prepare the statement of
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