George Fielding is a financial planning consultant. He provides budgeting, estate planning, tax planning, and investing advice for professional golfers. He developed the following chart of accounts for his business: 101 Cash 142 Office Supplies 202 Accounts Payable 311 George Fielding, Capital 511 Wages Expense 533 Utilities Expense 312 George Fielding, Drawing 401 Professional Fees 521 Rent Expense 525 Telephone Expense 534 Charitable Contributions Expense 538 Automobile Expense The following transactions took place during the month of December of the current year: Dec 1 Fielding invested cash to start the business, P250,000. 3 Paid Bollhost Real Estate for December office rent, P5,000. 4 Received cash from Aaron Patton, a client, for services, P2,500. Paid T. Z. Anderson Electric for December heating and light, P7,500. . Z.A 7 Received cash from Andrew Conder, a client, for services, P2,000. 12 Paid Fichter's Super Service for gasoline and oil purchases for the company car, P6,000. Paid Hillenburg Staffing for temporary secretarial services during the past two weeks, P4,000. 14 17 Bought office supplies from Bowers Office Supply on account, P2,800. 20 Paid Mitchell Telephone Co. for business calls during the past month, P1,000. 21 Fielding withdrew cash for personal use, P1,100. 24 Made donation to the National Multiple Sclerosis Society, P3,000. 27 Received cash from Billy Walters, a client, for services, P2,000. 28 Paid Hillenburg Staffing for temporary secretarial services during the past two weeks, P4,000. 29 Made payment on account to Bowers Office Supply, P1,000.
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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