Exercise-6 Ali is a sole trader who buys and sells mechanical goods. The following sales are expected over the six-month period from November 2019 to April 2020 Purchases Sales Nov OMR 30000 OMR 29000 Dec OMR 32000 OMR 14000 Jan OMR 24000 OMR 30000 Feb OMR 16000 OMR 22000 Mar OMR 24000 OMR 28000 Apr OMR 18000 OMR 20000 Additional Information: 1. Salaries are paid each month of OMR 12000, which are paid in month that they are incurred 2. Wages are paid each month of OMR 2000, which are paid in month that they are incurred. 3. On 1 Feb 2020, a new machine is purchased for OMR 8000. 4. Sales are all on credit and we allow a month credit period 5. Purchases are all in cash 6. The balance at the bank as at 31st December 2019 was OMR 1000 Prepare a cash budget for the four month period ending 30 April 2020.
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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