On 10h January 2006, Martin Kinuthia, a sole trader received his monthly statement for December 2005. The statement showed the following: Date Particulars Debit Credit Balance 2005 Sh. Sh. Sh. Dec1 Balance 186,200 161,900 Cheque No.417864 (Electricity) 24,300 Dividend 2,600 164,500 Local Cheque deposit (Solomon Otieno) Cheque No. 417866 (Jemima Nyambura) Cheque No. 417867 (Young traders) Miscellaneous credit (Kevin Kagai) Standing Order Cheque No. 417865 (Janet Aoko) Local cheque deposit (Donald Korir) Cheque No. 417868 (David Okoth) Cheque No. 417870 (Rent) Bank charges Local cheque deposit (J. Nduta) 21,200 185,700 168,300 166,600 18,500 185,100 8 17,400 10 1,700 13 14 3,200 181,900 151,200 20 30,700 20 11,800 163,000 153,500 137,400 135,600 4,700 140,300 21 9,500 16,100 1,800 21 24 27 Direct debit 8,800 1,200 28 Cheque No. 417873 (Daniel Wambua) Local cheque deposit (Joseph Ondieki) Cheque No. 417871 (Moses Siringi) 131,500 130,300 27,900 158,200 29 29 2,500 Martin Kinuthis Cash book for the month of December 2005 was as follows 31 155,700 CASH BOOK 2005 sh. 2005 cheque No Sh. Dec 1 Balance B/d Electricity 186,200 Dec 1 21,200 2 18,500 5 11,800 6 4,700 10 27,900 14 9,800 15 13,400 20 417864 24,300 4 Solomon Otieno Janet Aoko 417865 30,700 Kevin Kagai Donald Korir Jemimah Nyambura Young Traders David Okoth victor Karanja 417866 17,400 19 417867 1,700 Joy Nduta Joseph Ondieki Owen Ndubi 24 417868 9,500 7,100 16,100 27 417869 29 Rent 417870 30 walter Oyugi Moses Siringi Steve Mahithya 417871 2,500 21 417872 3,700 Daniel Wambua 1,200 179,300 22 417873 31 Bal C/d 293.500 293.500 Required: a) Updated Cash bock for Martin as at 31-12-2005 b) Bank Reconciliation statement
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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