Diaz Company is a retail store with two operating departments, Clothes and Shoes. Information follows. For Year Ended December 31 Clothes Shoes Sales $ 825,600 $ 464,400 430,000 Cost of goods sold 301,860 Direct expenses: Wages 122,000 87,000 Supplies used 11,000 10,000 Depreciation 17,000 12,000 The company reports the following indirect expenses for the year. Indirect Expense Utilities Supervisor salaries. Allocation Base Square feet of space occupied Number of employees in department Amount $ 7,800 31,000 Additional information about the two departments follows. Department Square Footage Number of Employees Clothes 25,800 66 Shoes 17,200 44 Required: 1. Allocate indirect expenses to the two operating departments. 2. Prepare departmental income statements.
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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