Determine year-end adjustments and account balances and prepare an income statement Hurricane company 2024 1. On October 1, 2024, Hurricane lent $9000 to another company. The other company signed a note indicating principal and 12% interest will be paid to Hurricane on September 30, 2025 2. On November 1. 2024, Hurricane paid its landlord $4,500, representing rent for the months of November through January. The payment was recorded in Prepaid rent for the entire amount on November 1. Costs related to rent for the first 11 months of the year total $15,000. 3. On august 1, 2024, hurricane collected $13,200 in advance from another company to provide consulting services for one year. The entire amount was recorded in deferred revenue. Hurricane generates $160,000 in other Service Revenue during the year. 4. Utilities owed at the end of the year are $400. For the first 11 months of the year, hurricane has paid $4,000 for utilities. 5. Salaries for the December earned by employees but not paid to them or recorded are $5000. For the first 11 months of the year, hurricane has paid $45,000 for salaries. 6. Hurricane began the year with $500 in supplies. During the year, the company purchased $2500 in supplies. At year-end, supplies costing $600 remain on hand. For each item, determine the accounts to be adjusted on December 31, 2024, the amount of the adjustment, and the ending balance. Assume no adjustments were previously made during the year. Prepare an income statement for the year ended December 31, 2024 based on the items above.
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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