Halogen Laminated Products Company began business on January 1, 2024. During January, the following transactions occurred: January 1 Issued common stock in exchange for $107,000 cash. January 2 Purchased inventory on account for $42,000 (the perpetual inventory system is used). January 4 Paid ad insurance company $3,240 for a one-year insurance policy. Prepaid insurance was debited for the entire amount. January 10 Sold inventory on account for $12,700. The cost of the inventory was $7,700. January 15 Borrowed $37,000 from a local bank and signed a note. Principal and interest at 10% is to be repaid in six months. January 20 Paid employees $6,700 salaries for the first half of the month. January 22 Sold inventory for $10,700 cash. The cost of the inventory was $6,700. January 24 Paid $15,700 to suppliers for the inventory purchased on January 2. January 26 Collected $6,350 on account from customers. January 28 Paid $1,100 to the local utility company for January gas and electricity. January 30 Paid $4,700 rent for the building. $2,350 was for January rent, and $2,350 for February rent. Prepaid rent and rent expense were debited for their appropriate amounts. Required: 1. Prepare general journal entries to record each transaction. 2. Post the transactions to the appropriate T-accounts. 3. Prepare an unadjusted trial balance as of January 30, 2024.
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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