Multiple-Step Income Statement and Report Form of Balance Sheet The following selected accounts and their current balances appear in the ledger of Kanpur Co. for the fiscal year ended June 30, 2019: Cash $119,700 Gerri Faber, Drawing $71,600 Accounts Receivable 319,000 Sales 4,325,900 Merchandise Inventory 363,700 Cost of Merchandise Sold 2,535,000 Estimated Returns Inventory 14,350 Sales Salaries Expense 712,900 Office Supplies 11,300 Advertising Expense 196,000 Prepaid Insurance 8,700 Depreciation Expense—Store Equipment 38,200 Office Equipment 263,300 Miscellaneous Selling Expense 16,700 Accumulated Depreciation—Office Equipment 178,900 Office Salaries Expense 389,200 Store Equipment 822,000 Rent Expense 57,500 Accumulated Depreciation—Store Equipment 263,300 Insurance Expense 17,800 Accounts Payable 182,200 Depreciation Expense—Office Equipment 28,700 Customer Refunds Payable 28,700 Office Supplies Expense 10,500 Salaries Payable 11,600 Miscellaneous Administrative Exp. 7,600 Note Payable (final payment due 2032) 382,500 Interest Expense 11,600 Gerri Faber, Capital 642,250 Required: 1. Prepare a multiple-step income statement. Kanpur Co.Income StatementFor the Year Ended June 30, 2019 Expenses: Selling expenses: Total selling expenses Administrative expenses: Total administrative expenses Total operating expenses 2. Prepare a statement of owner's equity. Kanpur Co.Statement of Owner's EquityFor the Year Ended June 30, 2019
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 Balance Sheet
The following selected accounts and their current balances appear in the ledger of Kanpur Co. for the fiscal year ended June 30, 2019:
| Cash | $119,700 | Gerri Faber, Drawing | $71,600 | |
| 319,000 | Sales | 4,325,900 | ||
| Merchandise Inventory | 363,700 | Cost of Merchandise Sold | 2,535,000 | |
| Estimated Returns Inventory | 14,350 | Sales Salaries Expense | 712,900 | |
| Office Supplies | 11,300 | Advertising Expense | 196,000 | |
| Prepaid Insurance | 8,700 | 38,200 | ||
| Office Equipment | 263,300 | Miscellaneous Selling Expense | 16,700 | |
| 178,900 | Office Salaries Expense | 389,200 | ||
| Store Equipment | 822,000 | Rent Expense | 57,500 | |
| Accumulated Depreciation—Store Equipment | 263,300 | Insurance Expense | 17,800 | |
| Accounts Payable | 182,200 | Depreciation Expense—Office Equipment | 28,700 | |
| Customer Refunds Payable | 28,700 | Office Supplies Expense | 10,500 | |
| Salaries Payable | 11,600 | Miscellaneous Administrative Exp. | 7,600 | |
| Note Payable (final payment due 2032) | 382,500 | Interest Expense | 11,600 | |
| Gerri Faber, Capital | 642,250 |
Required:
1. Prepare a multiple-step income statement.
| Kanpur Co. Income Statement For the Year Ended June 30, 2019 |
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|---|---|---|---|
| Expenses: | |||
| Selling expenses: | |||
| Total selling expenses | |||
| Administrative expenses: | |||
| Total administrative expenses | |||
| Total operating expenses | |||
2. Prepare a statement of owner's equity.
| Kanpur Co. Statement of Owner's Equity For the Year Ended June 30, 2019 |
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|---|---|---|
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