LONG PROBLEM 1. The following transactions were completed by CCL Company in 2022, whose fiscal year ends December 31: a. On January 1, Cheng, the owner, invested P10 million cash in a newly organized business, CCL Company, a merchandising company. b. On January 1, the Company bought a building for P5 million cash. The building is expected to have a useful life of 20 years and will have a residual value of P1 million. e. On January 1, the Company bought furniture and fixtures to be used in the operation of the business for P400,000. These are depreciable over 10 years. d. On January 1, the Company bought office equipment for P600,000. These are depreciated over five years. e. On April 1, the Company borrowed P1.2 million cash from the bank under a loan contract. Interest rate for the loan was 8% per annum, to be paid on April the following year. f. On April 1, the Company then bought two transportation vehicles worth P1.2 million using the proceeds from the loan. These are depreciated over five years. g. Throughout the year, the Company bought merchandise from its suppliers worth P20 million on account. A balance of P2.5 million remained unpaid as of the end of the year. h. Throughout the year, the Company sold merchandise for P21 million. On average, cost of goods sold was 80% of sales. 15% of the sales remained uncollected as of the end of the year. i. Total salaries paid to employees during the year amounted to P1.2 million, while December salaries of P60,000 will only be paid in January of the next year. j. Total utilities incurred for the year was P260,000. There was remaining unpaid bills amounting to P20,000 as of the end of the year. k. Other operating expenses which were paid in cash amounted to P300,000. Requirements: 1. Prepare ALL journal entries to record the above transactions, including adjusting entries and closing entries. 2. Prepare the income statement for the year ended December 31, 2022. 3. Prepare the balance sheet as of December 31, 202
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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