Metlock Inc., a provider of consulting services, was founded on October 1, 2022. At the end of the first month of operations, the company decided to prepare an income statement, retained earnings statement, and balance sheet using the following information. $4,200 Supplies Accounts payable $2,560 370 Supplies expense Interest expense 450 Equipment (net) 49.000 Depreciation expense 240 Salaries and wages expense 2.900 Service revenue 20,500 Bonds payable 21,600 Salaries and wages payable 4,110 Common stock 1,200 Interest payable 3,950 520 Unearned service revenue 9.600 Accounts receivable 140 Cash Using the information, answer the following questions. (a1) Prepare an income statement for the month of October 2022. METLOCK INC. Income Statement %24
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.
Metlock Inc., a provider of consulting services, was founded on October 1, 2022. At the end of the first month of operations, the company decided to prepare an income statement,
|
Accounts payable
|
$ 4,200 |
Supplies
|
$ 2,560 | |||
|---|---|---|---|---|---|---|
|
Interest expense
|
370 |
Supplies expense
|
450 | |||
|
Equipment (net)
|
49,000 |
|
240 | |||
|
Salaries and wages expense
|
2,900 |
Service revenue
|
20,500 | |||
|
Bonds payable
|
21,600 |
Salaries and wages payable
|
520 | |||
|
Unearned service revenue
|
4,110 | Common stock | 9,600 | |||
| 1,200 | Interest payable | 140 | ||||
| Cash | 3,950 |
Using the information, answer the following questions.
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