II. The following Trial Balance is from the books of accounts of Chayada Traders for the period ending 31st March 2021. Particulars Chayada's drawings Furniture and Fittings Sales Return Discount Allowed Insurance Premium General Expenses Salaries Business Premises Commission paid Stock on 1st April 2020 Transport Expenses Bad Debts written off Sundry Debtors Purchases Cash in hand Cash at Bank Dr. (in B) 50000 26000 20000 16000 20000 40000 90000 200000 22000 220000 18000 8000 180000 1100000 50000 30000 2090000 Particulars Chayada's Capital Bank Overdraft Sales Creditors Discount Received Rent Received Long-term Loan Cr. (in B) 300000 42000 1500000 138000 20000 10000 80000 2090000 Prepare an income statement for the year ended 31st March 2021 and a Balance Sheet as of that date after accounting for the following adjustments: Additional Information: 1. Closing Stock as of 31st March 2021 $ 200600 whereas its net realizable value (market value) was $ 205000. 2. Depreciate Business Premises by $ 3000 and Furniture & Fittings by $ 2500. 3. Make a provision for 5% on debtors for doubtful debts 4. Carry forward $2000 for unexpired insurance. 5. Outstanding salaries were $ 15000.
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.
Step by step
Solved in 3 steps with 6 images
