From the following balances taken from the ledger of Shri Krishna on 31st March 2007, prepare the trading and profit and loss account for the year ended 31st March 2007 and the balance sheet as on 31st March 2007 of Shri Krisha. Particulars Amount Particulars Amount Sundry creditors Buildings Income tax Lease tools Cash at bank Sundry expenses Bank interest Purchases Wages Carriage inwards Sales Motor van Cash in hand 12,000 15,000 1,025 1,000 16,200 1,990 75 157,000 10,000 1,120 185,000 12,500 335 Bad debts Loan from RAM sundry debtors Investments Bad debts reserve Rent and rates Furniture Stock (1.4.2006) Capital Discount allowed Dividends received Drawings Bills payable 100 600 9,500 6,500 1,600 850 3,000 27,350 47,390 630 535 2,000 10,000 Adjustments to be made. a) Write off further sh. 300 as bad out of sundry debtors and create a provision for bad debts at 20% of debtors. b) Dividends accrued and due on investments is sh. 135 rates paid in advance sh. 100 and wages owing sh. 450. c) On 31.3.2007 stock was valued at sh. 15,000 and loose tools were valued at sh. 800 d) Write off 5% for depreciation on buildings and 40% on motor van. e) Provide for interest at 12% per annum due on loan taken on 1.6.2006. f) Income tax paid has been treated as drawings.
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.
From the following balances taken from the ledger of Shri Krishna on 31st March 2007, prepare the trading and
Particulars |
Amount |
Particulars |
Amount |
Sundry creditors Buildings Income tax Lease tools Cash at bank Sundry expenses Bank interest Purchases Wages Carriage inwards Sales Motor van Cash in hand |
12,000 15,000 1,025 1,000 16,200 1,990 75 157,000 10,000 1,120 185,000 12,500 335 |
Loan from RAM sundry debtors Investments Bad debts reserve Rent and rates Furniture Stock (1.4.2006) Capital Discount allowed Dividends received Drawings Bills payable |
100 600 9,500 6,500 1,600 850 3,000 27,350 47,390 630 535 2,000 10,000 |
Adjustments to be made.
a) Write off further sh. 300 as bad out of sundry debtors and create a provision for bad debts at 20% of debtors.
b) Dividends accrued and due on investments is sh. 135 rates paid in advance sh. 100 and wages owing sh. 450.
c) On 31.3.2007 stock was valued at sh. 15,000 and loose tools were valued at sh. 800
d) Write off 5% for
e) Provide for interest at 12% per annum due on loan taken on 1.6.2006.
f) Income tax paid has been treated as drawings.
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