Demo Consulting is a consulting firm owned and operated by Jesse Flatt The following end-of-period spreadsheet was prepared for the year ended August 31, 20V9: Demo Consulting End-of-Period Spreadsheet For the Year Ended August 31, 20Y9 Unadjusted Adjusted Trial Balance Adjustments Trial Balance Account Title Cr. Cr. Cr. Dr. Dr. Dr. Cash 10,710 10,710 Accounts Receivable 25,500 25,500 Supplies 2,700 2,270 430 Land 22,190 22,190 Office Equipment 20,910 20,910 Accumulated Depreciation 2,830 1,350 4,180 Accounts Payable 6,890 6,890 Salaries Payable 330 330 Common Stock 8,600 8,600 Retained Eamings 17,410 17,410 Dividends 3,320 3,320 Fees Earned 0,770ר 70,770 Salary Expense 19,130 330 19,460 Supplies Expense 2,270 2,270 Depreciation Expense 1,350 1,350 Miscellaneous Expense 2,040 2,040 106,500 106,500 3,950 3,950 108,180 108,180 Based on the preceding spreadsheet, prepare an income statement for Demo Consulting. Demo Consulting Income Statement For the Year Ended August 31, 20Y9 70,770 Fees earned v Expenses: Salary expense v Supplies expense 19,460 2,270 Depreciation expense 1,350 Miscellaneous expense 2,010 Total expenses 25,120 Net income 45,650
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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