Jaworski’s Ski Store is completing the accounting process for its first year ended December 31, 2021. The transactions during 2021 have been journalized and posted. The following data are available to determine adjusting journal entries: The unadjusted balance in Supplies was $930 at December 31, 2021. The unadjusted balance in Supplies Expense was $0 at December 31, 2021. A year-end count showed $140 of supplies on hand. Wages earned by employees during December 2021, unpaid and unrecorded at December 31, 2021, amounted to $4,100. The last paychecks were issued December 28; the next payments will be made on January 6, 2022. The unadjusted balance in Salaries and Wages Expense was $44,000 at December 31, 2021. A portion of the store’s basement is now being rented for $1,500 per month to K. Frey. On November 1, 2021, the store collected six months’ rent in advance from Frey in the amount of $9,000. It was credited in full to Deferred Revenue when collected. The unadjusted balance in Rent Revenue was $0 at December 31, 2021. The store purchased delivery equipment at the beginning of the year. The estimated depreciation for 2021 is $2,400, although none has been recorded yet. On December 31, 2021, the unadjusted balance in Prepaid Insurance was $3,160. This was the amount paid in the middle of the year for a two-year insurance policy with coverage beginning on July 1, 2021. The unadjusted balance in Insurance Expense was $640, which was the cost of insurance from January 1 to June 30, 2021. Jaworski’s store did some ski repair work for Frey. At the end of December 31, 2021, Frey had not paid for work completed amounting to $790. This amount has not yet been recorded as Service Revenue. Collection is expected during January 2022.
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.
Jaworski’s Ski Store is completing the accounting process for its first year ended December 31, 2021. The transactions during 2021 have been journalized and posted. The following data are available to determine adjusting journal entries:
- The unadjusted balance in Supplies was $930 at December 31, 2021. The unadjusted balance in Supplies Expense was $0 at December 31, 2021. A year-end count showed $140 of supplies on hand.
- Wages earned by employees during December 2021, unpaid and unrecorded at December 31, 2021, amounted to $4,100. The last paychecks were issued December 28; the next payments will be made on January 6, 2022. The unadjusted balance in Salaries and Wages Expense was $44,000 at December 31, 2021.
- A portion of the store’s basement is now being rented for $1,500 per month to K. Frey. On November 1, 2021, the store collected six months’ rent in advance from Frey in the amount of $9,000. It was credited in full to Deferred Revenue when collected. The unadjusted balance in Rent Revenue was $0 at December 31, 2021.
- The store purchased delivery equipment at the beginning of the year. The estimated
depreciation for 2021 is $2,400, although none has been recorded yet. - On December 31, 2021, the unadjusted balance in Prepaid Insurance was $3,160. This was the amount paid in the middle of the year for a two-year insurance policy with coverage beginning on July 1, 2021. The unadjusted balance in Insurance Expense was $640, which was the cost of insurance from January 1 to June 30, 2021.
- Jaworski’s store did some ski repair work for Frey. At the end of December 31, 2021, Frey had not paid for work completed amounting to $790. This amount has not yet been recorded as Service Revenue. Collection is expected during January 2022.
Required:
For each of the transactions, indicate the amount and direction of effects of the
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