INCOME STATEMENT,OWNER EQUITY AND BALANCE SHEET The following selected accounts and their current balances appear in the ledger of Kanpur Co. for the fiscal year ended June 30, 2019: Cash $112,500 Gerri Faber, Drawing $67,400 Accounts Receivable 302,600 Sales 4,066,600 Merchandise Inventory 341,900 Cost of Merchandise Sold 2,383,000 Estimated Returns Inventory 13,500 Sales Salaries Expense 670,100 Office Supplies 10,600 Advertising Expense 184,300 Prepaid Insurance 8,200 Depreciation Expense—Store Equipment 35,900 Office Equipment 247,500 Miscellaneous Selling Expense 15,700 Accumulated Depreciation—Office Equipment 168,200 Office Salaries Expense 365,800 Store Equipment 772,700 Rent Expense 54,000 Accumulated Depreciation—Store Equipment 247,500 Insurance Expense 16,800 Accounts Payable 171,300 Depreciation Expense—Office Equipment 27,000 Customer Refunds Payable 27,000 Office Supplies Expense 9,900 Salaries Payable 10,900 Miscellaneous Administrative Exp. 7,200 Note Payable (final payment due 2032) 360,000 Interest Expense 10,900 Gerri Faber, Capital 606,000
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.
INCOME STATEMENT,OWNER EQUITY AND
The following selected accounts and their current balances appear in the ledger of Kanpur Co. for the fiscal year ended June 30, 2019:
| Cash | $112,500 | Gerri Faber, Drawing | $67,400 | |
| 302,600 | Sales | 4,066,600 | ||
| Merchandise Inventory | 341,900 | Cost of Merchandise Sold | 2,383,000 | |
| Estimated Returns Inventory | 13,500 | Sales Salaries Expense | 670,100 | |
| Office Supplies | 10,600 | Advertising Expense | 184,300 | |
| Prepaid Insurance | 8,200 | 35,900 | ||
| Office Equipment | 247,500 | Miscellaneous Selling Expense | 15,700 | |
| 168,200 | Office Salaries Expense | 365,800 | ||
| Store Equipment | 772,700 | Rent Expense | 54,000 | |
| Accumulated Depreciation—Store Equipment | 247,500 | Insurance Expense | 16,800 | |
| Accounts Payable | 171,300 | Depreciation Expense—Office Equipment | 27,000 | |
| Customer Refunds Payable | 27,000 | Office Supplies Expense | 9,900 | |
| Salaries Payable | 10,900 | Miscellaneous Administrative Exp. | 7,200 | |
| Note Payable (final payment due 2032) | 360,000 | Interest Expense | 10,900 | |
| Gerri Faber, Capital | 606,000 |
Required:
1. Prepare a multiple-step income statement.
| Kanpur Co. Income Statement For the Year Ended June 30, 2019 |
|||
|---|---|---|---|
| Sales | |||
| Cost of merchandise sold | |||
| Gross profit | |||
| Expenses: | |||
| Selling expenses: | |||
| Sales salaries expense | |||
| Advertising expense | |||
| Depreciation expense-store equipment | |||
| Miscellaneous selling expense | |||
| Total selling expenses | |||
| Administrative expenses: | |||
| Office salaries expense | |||
| Rent expense | |||
| Insurance expense | |||
| Depreciation expense-office equipment | |||
| Office supplies expense | |||
| Miscellaneous administrative expense | |||
| Total administrative expenses | |||
| Total operating expenses | |||
| Income from operations | |||
| Other expense: | |||
| Interest expense | |||
| Net income |
2. Prepare a statement of owner's equity.
| Kanpur Co. Statement of Owner's Equity For the Year Ended June 30, 2019 |
||
|---|---|---|
3. Prepare a balance sheet, assuming that the current portion of the note payable is $14,400.
| Kanpur Co. Balance Sheet June 30, 2019 |
|||
|---|---|---|---|
| Assets | |||
| Current assets: | |||
| Total current assets | |||
| Property, plant, and equipment: | |||
| Total property, plant, and equipment | |||
| Total assets | |||
| Liabilities | |||
| Current liabilities: | |||
| Total current liabilities | |||
| Long-term liabilities: | |||
| Total liabilities | |||
| Owner's equity | |||
| Total liabilities and owner's equity |
4. Which type of income statement shows intermediate balances?
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