Jim commenced business as a sole trader under the name of ‘JimTag’, and he has provided the following accounts and their closing balances for the year ended 31st December 2020: Jim Tag Unadjusted Trial Balance as at 31 December 2020 Accounts $ $ Capital: JimTag as at 1 January, 2020 98,900 Drawings 21,700 Sales 260,700 PAYG Withheld 23,200 Cost of Goods Sold 128,700 Cash at Bank 22,400 Accounts Receivable 14,150 GST Collected 25,500 Sales commissions expense 6,560 Staff salaries expense 64,500 Accounting fees 2,300 Advertising expense 7,970 Inventory as at 31 December, 2020 40,250 Computer Equipment at cost 36,000 Shop Fittings at cost 70,000 Accumulated Depreciation: Computer Equipment 5,400 Accumulated Depreciation: Shop Fittings 18,000 Accounts Payable 18,900 Long-term Bank Loan (Due on 1 June 2024) 28,000 Bank charges 1,670 Insurance expense 5,550 Electricity expense 6,200 Telephone expense 4,750 GST Paid 21,900 Rent expense 24,000 TOTAL 478,600 478,600 The following balance day adjustments have NOT been completed: • Depreciation is charged at 10% on cost for both Store Fittings and Computer Equipment. • Accounting fees owing at balance day are $400. Required: Prepare a fully classified Statement of Financial Position (Balance Sheet) as at 31 December 2020.
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.
Jim commenced business as a sole trader under the name of ‘JimTag’, and he has provided the following accounts and their closing balances for the year ended 31st December 2020:
|
Jim Tag Unadjusted |
||
Accounts |
$ |
$ |
|---|---|---|
| Capital: JimTag as at 1 January, 2020 | 98,900 | |
| Drawings | 21,700 | |
| Sales | 260,700 | |
| PAYG Withheld | 23,200 | |
| Cost of Goods Sold |
128,700 |
|
| Cash at Bank | 22,400 | |
| 14,150 | ||
| GST Collected | 25,500 | |
| Sales commissions expense | 6,560 | |
| Staff salaries expense | 64,500 | |
| Accounting fees | 2,300 | |
| Advertising expense | 7,970 | |
| Inventory as at 31 December, 2020 | 40,250 | |
| Computer Equipment at cost | 36,000 | |
| Shop Fittings at cost | 70,000 | |
| 5,400 | ||
| Accumulated Depreciation: Shop Fittings | 18,000 | |
| Accounts Payable | 18,900 | |
| Long-term Bank Loan (Due on 1 June 2024) | 28,000 | |
| Bank charges | 1,670 | |
| Insurance expense | 5,550 | |
| Electricity expense | 6,200 | |
| Telephone expense | 4,750 | |
| GST Paid | 21,900 | |
| Rent expense | 24,000 | |
| TOTAL | 478,600 | 478,600 |
The following balance day adjustments have NOT been completed:
• Depreciation is charged at 10% on cost for both Store Fittings and Computer Equipment.
• Accounting fees owing at balance day are $400.
Required:
Prepare a fully classified
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