III. Balance sheet of Company Beta dated 31.12.2015 showed the following accounts: a) fixed assets 60 000* b) trade receivables 12 500 c) cash in bank account 7 500 d) share capital 50 000 e) trade payables 20 000 f) long-term liabilities 10 000 * accumulated depreciation of fixed assets 10 000 In January the company noted the following economic transactions: 1. Materials worth 6 500 were taken from the warehouse and used: a) for production purposes 5 000 b) as a casual office use 1 500 2. Company calculated salaries: a) of manufacturing workers 3 000 b) of administrative staff 5 000 c) of sales representatives 2000 3. Company paid by bank transfer a water bill: a) 1 000 for electricity used for production of goods b) 500 for electricity used for office purposes 4. Company paid 1 200 for interest on long-term liabilities 5. Company received a payment from customer 6 500 6. 1000 units of finished products were produced and taken into warehouse at manufacturing cost. Work in progress was calculated and recognized. 7. Company sold 700 units of finished goods with deferred payment. Selling price was 25 per unit. 8. Sold products were taken from the warehouse and delivered to the customer. 9. Company received an invoice for transport of finished products for 100. Required: 1/ Open the accounts with opening balances 2/ Record all transactions. Costs are recorded both as costs by nature and costs by functions 3/ Close all accounts, show their ending balances and calculate profit or loss for January according to costs by function structure in the Profit/(loss) accoun
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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