For each change, state clearly the exact transaction that led to such an effect on the statement of financial position. ASSETS 1 2 3 4 5 6 7 Premises 5,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 Motor Vehicle 2,000 3,000 3,000 3,000 3,000 3,000 3,000 2,800 Inventory 550 550 2,250 1,500 1,500 650 650 650 Receivables 1,200 1,200 1,200 1,200 1,200 2,150 950 950 Cash and Bank 2,450 2,450 2,450 3,250 1,000 1,000 2,200 2,200 Total Assets 11,200 13,200 14,900 14,950 12,700 12,800 12,800 12,600 EQUITY AND LIABILITIES Equity 7,500 9,500 9,500 9,550 9,550 9,650 9,650 9,450 Liabilities Loan 2,750 2,750 2,750 2,750 1,750 1,750 1,750 1,750 Payables 950 950 2,650 2,650 1,400 1,400 1,400 1,400 Total Equity and Liabilities 11,200 13,200 14,900 14,950 12,700 12,800 12,800 12,600
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.
- In the month of July, Happy Limited produced a summarized
statement of financial position as at the end of the month showing the changes over the period. For each change, state clearly the exact transaction that led to such an effect on the statement of financial position.
|
ASSETS |
|
1 |
2 |
3 |
4 |
5 |
6 |
7 |
|
Premises |
5,000 |
6,000 |
6,000 |
6,000 |
6,000 |
6,000 |
6,000 |
6,000 |
|
Motor Vehicle |
2,000 |
3,000 |
3,000 |
3,000 |
3,000 |
3,000 |
3,000 |
2,800 |
|
Inventory |
550 |
550 |
2,250 |
1,500 |
1,500 |
650 |
650 |
650 |
|
Receivables |
1,200 |
1,200 |
1,200 |
1,200 |
1,200 |
2,150 |
950 |
950 |
|
Cash and Bank |
2,450 |
2,450 |
2,450 |
3,250 |
1,000 |
1,000 |
2,200 |
2,200 |
|
Total Assets |
11,200 |
13,200 |
14,900 |
14,950 |
12,700 |
12,800 |
12,800 |
12,600 |
|
EQUITY AND LIABILITIES |
|
|
|
|
|
|
|
|
|
Equity |
7,500 |
9,500 |
9,500 |
9,550 |
9,550 |
9,650 |
9,650 |
9,450 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
Loan |
2,750 |
2,750 |
2,750 |
2,750 |
1,750 |
1,750 |
1,750 |
1,750 |
|
Payables |
950 |
950 |
2,650 |
2,650 |
1,400 |
1,400 |
1,400 |
1,400 |
|
Total Equity and Liabilities |
11,200 |
13,200 |
14,900 |
14,950 |
12,700 |
12,800 |
12,800 |
12,600 |
Step by step
Solved in 8 steps
