Lock & Key Inc. began operations on January 1, 2022. Its post-closing trial balance at December 31, 2022 and 2023, is shown below along with some other information. Revenues: Sales Cost of goods sold Gross Profit Lock & Key Inc. Income Statement For Year Ended December 31, 2023 (000s) Expenses: Other expenses Depreciation expense Total expenses Loss Account Cash Lock & Key Inc. Post-Closing Trial Balance (000s) Receivables Merchandise inventory Property, plant and equipment Accumulated depreciation Accounts payable Accrued liabilities Bonds payable Common shares Retained earnings $ 560 240 $3,400 2,990 410 Cash flows from operating activities: 800 $ 390 December 31 2023 2022 $3,160 $1,360 2,190 2,140 3,820 1,540 1,540 240 3,080 2,674 2,236 1,540 2,470 4,060 1,480 1,180 360 3,200 560 2,650 Other information regarding Lock & Key Inc. and its activities during 2023: 1. Assume all accounts have normal balances. 2. Cash dividends were declared and paid during the year. 3. Equipment was sold for cash equal to its book value. Required: Using the information provided, prepare a statement of cash flows (applying the indirect method) for the year ended December 31, 2023. (List any deduction in cash and cash outflows and loss as negative amounts. Enter amounts in thousands, not in dollar.) LOCK & KEY INC. Statement of Cash Flows For Year Ended December 31, 2023 (000s) Adjustments to reconcile profit to net cash inflows from operating activities: C
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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