Instructions 1. Prepare journal entries to record each of the events listed. Provide relevant descriptions for each journal entry in good form; skip a line between entries. Post Journal Entries to the General Ledger 2. 3. Prepare a trial balance as of May 31, 2017. Home Services was formed on May 1, 2017. The following transactions took place during the first month. 1. May 1-Stockholders invested $60,000 cash in exchange for common stock. 2. May 1-Signed a 2-year rental agreement on a warehouse; paid $36,000 cash in advance for the first year. 3. May 1- Purchased equipment costing $35,000. A cash payment of $12,000 was made immediately, the remainder will be paid in 60 days. 4. May 1-Paid $1,500 cash for a one-year insurance policy on the equipment. 5. May 2-Purchased basic office supplies for $400 cash. 6. May 3-Purchased office supplies from Office Depot for $1,600 on account. 7. May 10-Received $12,000 cash for services performed for a new customer. 8. May 13- Paid $600 to Office Depot for supplies purchased on account on May 3. 9. May 18-$16,000 of services were performed for B. Jones on account. 10. May 31 -Received May utility bill in the amount of $400, to be paid next month. 11. May 31-Paid the monthly salaries of the two employees, totalling $7,600. 12. May 31-Received $6,000 from B. Jones on account. 101 - Cash 112-Accounts Receivable 120-Supplies 136-Prepaid Rent 140-Prepaid Insurance 157-Equipment Home Services Chart of Accounts 201-Accounts Payable 311-Common Stock 400-Service Revenue 726-Salaries & Wages Expense 729-Rent Expense 730-Utility Expense
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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