Multiple-Step Income Statement and Report Form of Balance Sheet The following selected accounts and their current balances appear in the ledger of Prescott Inc. for the fiscal year ended September 30, 20Y8: Cash $187,875 Retained Earnings (as of Sept. 30, 20Y7) $ 571,050 Accounts Receivable 337,500 Dividends 281,250 Inventory 850,500 Sales 8,025,750 Estimated Returns Inventory 78,750 Cost of Goods Sold 4,893,750 Office Supplies 33,750 Sales Salaries Expense 874,800 Prepaid Insurance 27,000 Advertising Expense 103,275 Office Equipment 259,200 Depreciation Expense— Store Equipment 18,675 Accumulated Depreciation— Office Equipment 111,375 Miscellaneous Selling Expense 4,500 Store Equipment 1,150,875 Office Salaries Expense 174,150 Accumulated Depreciation— Store Equipment 420,075 Rent Expense 89,775 Accounts Payable 109,350 Insurance Expense 51,638 Customer Refunds Payable 78,750 Depreciation Expense— Office Equipment 36,450 Salaries Payable 21,600 Office Supplies Expense 3,712 Note Payable (due evenly over next 5 years) 117,000 Miscellaneous Administrative 4,275 Common Stock 33,750 Interest Expense 27,000 Instructions: 1. Prepare a multiple-step income statement. 2. Prepare a statement of stockholders' equity. No common stock was issued during the year. For those boxes in which no entry is required, leave the box blank. 3. Prepare a report form of balance sheet, assuming that the current portion of the note payable is $23,400.
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.
Multiple-Step Income Statement and Report Form of
The following selected accounts and their current balances appear in the ledger of Prescott Inc. for the fiscal year ended September 30, 20Y8:
| Cash | $187,875 | $ 571,050 | |||||
| 337,500 | Dividends | 281,250 | |||||
| Inventory | 850,500 | Sales | 8,025,750 | ||||
| Estimated Returns Inventory | 78,750 | Cost of Goods Sold | 4,893,750 | ||||
| Office Supplies | 33,750 | Sales Salaries Expense | 874,800 | ||||
| Prepaid Insurance | 27,000 | Advertising Expense | 103,275 | ||||
| Office Equipment | 259,200 | 18,675 | |||||
| 111,375 | Miscellaneous Selling Expense | 4,500 | |||||
| Store Equipment | 1,150,875 | Office Salaries Expense | 174,150 | ||||
| Accumulated Depreciation— Store Equipment | 420,075 | Rent Expense | 89,775 | ||||
| Accounts Payable | 109,350 | Insurance Expense | 51,638 | ||||
| Customer Refunds Payable | 78,750 | Depreciation Expense— Office Equipment | 36,450 | ||||
| Salaries Payable | 21,600 | Office Supplies Expense | 3,712 | ||||
| Note Payable (due evenly over next 5 years) | 117,000 | Miscellaneous Administrative | 4,275 | ||||
| Common Stock | 33,750 | Interest Expense | 27,000 |
Instructions:
1. Prepare a multiple-step income statement.
2. Prepare a statement of
3. Prepare a report form of balance sheet, assuming that the current portion of the note payable is $23,400.
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