MIDWAY TRADERS PRE-ADJUSTMENT TRIAL BALANCE AS AT 29 FEBRUARY 2020 Debit (R) Credit (R) Balance sheet accounts section Capital Drawings Land and buil dings Vehicles at cost Equipment at cost Accumulated depreciation on vehicles Accumulated depreciation on equipment Fixed depasit: Pep Bank (8% p.a.) Trading inventary Debtors control Provision for bad debts Bank Creditors control Mortgage loan: Pep Bank (20% p.a.) 1656 600 134 200 1 254 900 945 000 650 000 528 000 365 200 198 000 155 000 176 600 9 900 137 800 184 800 330 000 Nominal accounts section Sales Cost of sales Sales returns Salaries and wages 2070 000 794 000 13 000 587 000 18 000 30 000 58 000 32 000 23 000 Bad debts Stationery Rates and taxes Motor expenses Advertising Telephone Electricity and water Bank charges Insurance Interest on fixed deposit Rent income 44 000 66 000 8 000 10 000 14 000 176 000 5334 500 5334 500
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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