Following was the Balance Sheet of X Limited as on 31-03-2016 1. Equity and Liabilities (1) Shareholders' Funds (a) Share Capital 8,000 Equity Shares of $100 each, $60 per share paid up 4,80,000 14% 4,000 Preference Shares of $100 each fully paid 4,00,000 (b) Reserves and Surplus: Surplus A/c (Negative Balance) (-) 2,40,000 (2) Non-current Liabilities Secured Loans : 2,30,000 (i) 14% Debentures (having a floating charge on all assets) Interest Accrued on Debentures (also having a floating charge as above) 32,200 (ii) Loan on Mortgage of Land and Building 1,50,000 (3) Current Liabilities Sundry Creditors 1,17,800 Total Equity and Liabilities 11,70,000 II. Assets (1) Non-current Assets Fixed Assets: Land 40,000 Buildings 1,60,000 Plant and Machinery 5,40,000 Intangible Asset : Patents 40,000 (2) Current Assets Stock at cost 1,00,000 Debtors 2,30,000 Cash at Bank 60,000 Total Assets 11,70,000 On 31-3-2016 the company went into voluntary liquidation. The dividend on 14% preference shares was in arrears for one year. Sundry creditors include preferential creditors amounting to $30,000. The assets realised the following sums: Land $ 80,000, Buildings 2,00,000; Plant and Machinery $ 5,00,000; Plant 50,000; Stock 1,60,0003; Sundry Debtors $ 2,00,000. The expenses of liquidation amounted to $29,434. The liquidator is entitled to a commission of 2% on all assets realised (except cash at bank) and 2% on amounts distributed among unsecured creditors other than preferential creditors. All payments were made on 30th June, 2016. Interest on mortgage loan shall be Ignored at the time of payment. Prepare the Liquidator's Final Statement of Account.
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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