Given below are the statements of financial position of King Bhd and Prince Bhd as at 30 June 2020: King Bhd (RM) Prince Bhd (RM) Non-current asset Freehold land at cost Plant and machinery at carrying value Fixtures & Fittings at carrying values Investment in Prince Bhd: 382,300 142,300 90,000 230,000 160,000 41,700 150,000 Ordinary shares at cost 25,000 10% Preference shares at cost RM28,500 10% Debentures at cost 282,800 25,000 28,500 Currents assets 25,000 60,000 34,830 Inventories Trade Receivables Bills Receivables Loan to Prince Bhd Bank 65,900 50,500 25,000 30,000 44,000 1,166,300 71,830 623,360 Financed by: Issued and paid up capital Ordinary share capital 10% Preference share capital 500,000 150,000 200,000 90,000 Reserves General reserves Asset revaluation reserve - Plant Retained profits 65,000 45,000 20,000 70,600 151,200 Non-current liability 10% debentures Loan from King Bhd 180,000 90,000 20,000 Current liabilities Bill payables Trade Payables Interest Payables Preference dividend payable 18,000 76,300 15,000 10,800 1,166,300 28,880 43,400 9,000 6,480 623,360
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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