Following are the Balance Sheets of A Ltd. and its subsidiaries B Ltd. and C Ltd. as on 31st March, 2016: C Ltd. A Ltd. $ B Lta. $ I. Equity and Liabilities (1) Shareholders' Funds (a) Share Capital Shares of (b) Reserves and Surplus : 100 each 12,50,000 | 10,00,000 6,00,000 1,80,000 1,60,000 1,00,000 20,000 72,000 51,000 Reserves Surplus Account (2) Current Liabilities Sundry Creditors 1,03,000 1,20,000 Total Equity and Liabilities 16,93,000 | 12,40,000 7,23,000 II. Assets (1) Non-current Assets Fixed Assets 2,80,000 5,50,000 3,75,000 (2) Current Assets 5,30,000 Investments at Cost Stock in Trade 10,30,000 1,20,000 2,63,000 Sundry Debtors 1,60,000 3,48,000 Total Assets 16,93,000 12,40,000 7,23,000 (a) The break-up of investments, which were all made on 30th September, 2015, is as under: (i) A Ltd. held- 7,500 shares in B Ltd. at a cost of 8,50,000 and 1,500 shares in C Ltd. at a cost of 1,80,000. (ii) B Ltd. held- 4,000 shares in C Ltd. at a cost of 5,30,000. (b) (i) Sundry Creditors of A Ltd. include 33,000 due to C Ltd. which amount is duly reflected in the books of C Ltd. (ii) Sundry Creditors of B Ltd. include 70,000 due to A Ltd. whereas Sundry Debtors of A Ltd. include 80,000 due from B Ltd., the difference of 10,000 being cash in transit from B Ltd. to A Ltd. as on 31st March, 2016. (c) (i) The subsidiaries' position as on the date of acquisition of shares (i.e. 30th September, 2015) was as follows : C Ltd. $ 60,000 B. Ltd. Reserves 90,000 Surplus Account Sundry Creditors 10,000 8,400 40,000 Fixed Assets 5,50,000 3,68,400 Stock-in-trade 40,000 5,50,000 3,00,000 Sundry Debtors (ii) The whole of the stock-in-trade of B Ltd. as on 30th September, 2015 was subsequently sold to A Ltd. at a profit of 20% on selling price. (d) The stock in trade ofA Ltd. as on 31st March, 2016 include 25,000 being cost of A Ltd. of the above stock purchased from B Ltd. and remaining unsold as on that date. Prepare a Consolidated Balance Sheet as on 31st March, 2016.
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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