Details of courier vehicles owned by Speedy Couriers at 1 July 2018 are as follows: This business is registered for GST. Cost Useful life Accumulated depreciation 50,500 Depreciation method Residual value 12,000 8,000 Straight-line Courier van Van 96,000 72,000 8 years 6 years Straight-line 21,000 30,000 Mini-van 66,000 10 years 6,000 Straight-line Required: a. Record the following transactions for Speedy Couriers for the year ending 30 June 2018 in the general journal. Narrations are not required. 1 July 2018: The owners of Speedy Couriers decided to re-value the Van to a fair value of $68,000. 30 December 2018: The courier van was exchanged for a new van with a cash price of $82,000. A trade-in allowance of $36,000 was received for the courier van. The balance outstanding was paid i cash: 30 June 2019: The mini-van was overhauled at a cost of $24,200 (including GST) after which the useful life was estimated to be 12 years. The residual value of the vehicle is revised to $10,000. The overhaul costs were paid in cash. The carrying value of parts replaced was $3,000.
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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