Faisal Repairs and Services has the following unadjusted balance at the end of the first year. Faisal Repairs and Services Unadjusted Trial Balance June 30, 2020 Accounts Debit Credit Cash 12,350 Account Receivable 50,000 Prepaid Insurance 17,500 Supplies 15,200 Equipment 148,700 Account Payable 19,750 Unearned Revenues 18,000 Capital 169,200 Drawings 18,000 Service Revenues 295,000 Wages Expenses 94,500 Rent Expense 72,000 Utilities Expenses 65,600 Miscellaneous Expenses 8,100 Total 501,950 501,950 Additional information: 1. Revenues earned but unbilled on June 30 were OMR 8,000. 2. Supplies on hand on June 30 were OMR 5,100. 3. Insurance expense for the year, OMR 3,700. 4. Unearned Revenues on June 30th were OMR 6,000. 5. Unpaid wages accrued on June 30 were OMR 4,500. Required: Prepare the necessary adjusting entries on 30 June 2020. Determine the balance of the accounts affected by the adjusting entries and prepare the adjusted trial balance.
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.
Faisal Repairs and Services has the following unadjusted balance at the end of the first year.
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Faisal Repairs and Services |
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Unadjusted |
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June 30, 2020 |
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Accounts |
Debit |
Credit |
|
Cash |
12,350 |
|
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Account Receivable |
50,000 |
|
|
Prepaid Insurance |
17,500 |
|
|
Supplies |
15,200 |
|
|
Equipment |
148,700 |
|
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Account Payable |
19,750 |
|
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Unearned Revenues |
18,000 |
|
|
Capital |
169,200 |
|
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Drawings |
18,000 |
|
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Service Revenues |
295,000 |
|
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Wages Expenses |
94,500 |
|
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Rent Expense |
72,000 |
|
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Utilities Expenses |
65,600 |
|
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Miscellaneous Expenses |
8,100 |
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Total |
501,950 |
501,950 |
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Additional information: |
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1. Revenues earned but unbilled on June 30 were OMR 8,000. |
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2. Supplies on hand on June 30 were OMR 5,100. |
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3. Insurance expense for the year, OMR 3,700. |
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4. Unearned Revenues on June 30th were OMR 6,000. |
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5. Unpaid wages accrued on June 30 were OMR 4,500. |
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Required: |
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Prepare the necessary |
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Determine the balance of the accounts affected by the adjusting entries and prepare the adjusted trial balance. |
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