Jones Limited is a manufacturer of electrical goods. You are a trainee accountant working for Jones Limited. The following statement of comprehensive income and statement of financial position extracts relate to Jones Limited. Jones Limited Statement of Comprehensive Income (Extracts) for the Year Ended 31 December 2018 GHȼm Operating profit 752 Finance costs (interest) (100) Profit before tax 652 Taxation (142) Profit after tax 510 Dividend (200) Retained profit 310 Jones Limited Statements of Financial Position as at 31 December 2017 2018 GHȼm GHȼm Assets Non-current assets 2,600 3,314 Current assets Inventory 1,346 1,390 Receivables 218 506 Cash 128 - 1,692 1,896 Assets 4,292 5,210 Equity and liabilities Stated capital 200 400 Income surplus 2,492 2,802 2,692 3,202 Non-current liabilities Loan note 200 300 Current liabilities Payables 1,256 1,414 Taxation 144 294 1,400 1,708 Total equity & liabilities 4,292 5,210 Additional Information: Depreciation charge for the year 316 Profit on disposal of non-current asset 36 Carrying amount of asset sold 58 Required: Prepare the statement of cash flows for Jones Limited for the year ended 31 December 2018
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.
Jones Limited is a manufacturer of electrical goods. You are a trainee accountant working for Jones Limited. The following statement of comprehensive income and
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Jones Limited |
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Statement of Comprehensive Income (Extracts) for the Year Ended 31 December 2018 |
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|
|
GHȼm |
|
Operating profit |
752 |
|
Finance costs (interest) |
(100) |
|
Profit before tax |
652 |
|
|
(142) |
|
Profit after tax |
510 |
|
Dividend |
(200) |
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Retained profit |
310 |
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Jones Limited |
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Statements of Financial Position as at 31 December |
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2017 |
2018 |
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GHȼm |
GHȼm |
|
Assets |
|
|
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Non-current assets |
2,600 |
3,314 |
|
Current assets |
|
|
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Inventory |
1,346 |
1,390 |
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Receivables |
218 |
506 |
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Cash |
128 |
- |
|
|
1,692 |
1,896 |
|
Assets |
4,292 |
5,210 |
|
Equity and liabilities |
|
|
|
Stated capital |
200 |
400 |
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Income surplus |
2,492 |
2,802 |
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|
2,692 |
3,202 |
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Non-current liabilities |
|
|
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Loan note |
200 |
300 |
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Current liabilities |
|
|
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Payables |
1,256 |
1,414 |
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Taxation |
144 |
294 |
|
|
1,400 |
1,708 |
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Total equity & liabilities |
4,292 |
5,210 |
Additional Information:
|
|
316 |
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Profit on disposal of non-current asset |
36 |
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Carrying amount of asset sold |
58 |
Required:
Prepare the statement of
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