In connection with your financial statement audit of Siargao, Inc., you were provided with the following statement of financial position as of December 31, 20x1: Siargao, Inc. Statement of Financial Position December 31, 20x1 Assets Liabilities and Equity Current assets Current Liabilities Cash P250,000 Accounts Payable P68,000 Trading securities 160,000 Other current liabilities 40,000 Accounts Receivable, net 427,000 Total P108,000 Inventory 620,000 Other Current Assets 284,000 Long term liabilities 655,000 Total P1,741,000 Total liabilities P763,000 Noncurrent assets: Equity Property, plant, and equipment, net P1,296,000 Share Capital P1,000,000 Treasury shares 90,000 Retained Earnings 1,636,000 Other noncurrent assets 272,000 Total P1,658,000 Total Equity P2,636,000 TOTAL ASSETS P3,399,000 TOTAL LIABILITIES & EQUITY P3,399,000 The following additional information relates to December 31, 20x1 statement of financial position: Cash includes P80,000 that has been restricted for the purchase of manufacturing equipment (a noncurrent asset) Trading securities include P55,000 of shares purchased to give the company a significant influence and a seat on the board of directors of a major Other current assets include advances to the president of the company amounting to P80,000. No due date has been Long-term liabilities also include bonds payable amounting to P200,000, P50,000 of which is scheduled to be redeemed in Long-term liabilities also include a bank loan of P140,000. On May 15, 20x2, the loan will become due on On December 21, dividends amounting to P300,000 were declared to be paid to shareholders of record on January 25, These dividends have not been reflected in the financial statements. Cash amounting to P380,000 has been placed in a restricted fund for the redemption of preference shares in 20x3. Both the cash and the shares have been removed from the statement of financial Property, plant, and equipment includes land costing P160,000 held for investment purposes and scheduled to be sold in REQUIRED: Based on the above information and the result of your audit, determine the adjusted amounts of the following as of December 31, 20x1: 1. Total current assets 2. Total noncurrent assets 3. Total current liabilities
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.
In connection with your financial statement audit of Siargao, Inc., you were provided with the following
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Siargao, Inc. |
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Statement of Financial Position |
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December 31, 20x1 |
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Assets |
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Liabilities and Equity |
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Current assets |
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Current Liabilities |
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Cash |
P250,000 |
Accounts Payable |
P68,000 |
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Trading securities |
160,000 |
Other current liabilities |
40,000 |
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427,000 |
Total |
P108,000 |
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Inventory |
620,000 |
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Other Current Assets |
284,000 |
Long term liabilities |
655,000 |
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Total |
P1,741,000 |
Total liabilities |
P763,000 |
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Noncurrent assets: |
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Equity |
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Property, plant, and equipment, net |
P1,296,000 |
Share Capital |
P1,000,000 |
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Treasury shares |
90,000 |
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1,636,000 |
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Other noncurrent assets |
272,000 |
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Total |
P1,658,000 |
Total Equity |
P2,636,000 |
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TOTAL ASSETS |
P3,399,000 |
TOTAL LIABILITIES & EQUITY |
P3,399,000 |
The following additional information relates to December 31, 20x1 statement of financial position:
- Cash includes P80,000 that has been restricted for the purchase of manufacturing equipment (a noncurrent asset)
- Trading securities include P55,000 of shares purchased to give the company a significant influence and a seat on the board of directors of a major
- Other current assets include advances to the president of the company amounting to P80,000. No due date has been
- Long-term liabilities also include bonds payable amounting to P200,000, P50,000 of which is scheduled to be redeemed in
- Long-term liabilities also include a bank loan of P140,000. On May 15, 20x2, the loan will become due on
- On December 21, dividends amounting to P300,000 were declared to be paid to shareholders of record on January 25, These dividends have not been reflected in the financial statements.
- Cash amounting to P380,000 has been placed in a restricted fund for the redemption of
preference shares in 20x3. Both the cash and the shares have been removed from the statement of financial - Property, plant, and equipment includes land costing P160,000 held for investment purposes and scheduled to be sold in
REQUIRED: Based on the above information and the result of your audit, determine the adjusted amounts of the following as of December 31, 20x1:
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1. Total current assets |
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2. Total noncurrent assets |
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3. Total current liabilities |
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