On December 31, Trinkets Supply Company noted the following transactions that occurred during 2015, some or all of which might require adjustment to the books. (a)Payment of $4,300 to suppliers was made for purchases on account during the year and was not recorded. (b)Building and land were purchased on January 2 for $190,000 . The building’s fair value was $141,000 at the time of purchase. The building is being depreciated over a 30-year life using the straight-line method, assuming no salvage value. (c)Of the $52,000 in Accounts Receivable, 5% is estimated to be uncollectible. Currently, Allowance for Bad Debts shows a debit balance of $200 . (d)On September 1, $80,000 was loaned to a customer on a 12-month note with interest at an annual rate of 11% . (e)During 2015, Trinkets Supply received $15,200 in advance for services, 80% of which will be performed in 2016. The $15,200 was credited to Sales Revenue. (f)The interest expense account was debited for all interest charges incurred during the year and shows a balance of $2,300 . However, of this amount, $300 represents a discount on a 60-day note payable, due January 30, 2016. INSTRUCTIONS: Give the necessary adjusting entries to bring the books up to date. Indicate the net change in income as a result of the foregoing adjustments.
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.
On December 31, Trinkets Supply Company noted the following transactions that occurred during 2015, some or all of which might require adjustment to the books.
(a)Payment of $4,300 to suppliers was made for purchases on account during the year and was not recorded.
(b)Building and land were purchased on January 2 for $190,000 . The building’s fair value was $141,000 at the time of purchase. The building is being
(c)Of the $52,000 in
(d)On September 1, $80,000 was loaned to a customer on a 12-month note with interest at an annual rate of 11% .
(e)During 2015, Trinkets Supply received $15,200 in advance for services, 80% of which will be performed in 2016. The $15,200 was credited to Sales Revenue.
(f)The interest expense account was debited for all interest charges incurred during the year and shows a balance of $2,300 . However, of this amount, $300 represents a discount on a 60-day note payable, due January 30, 2016.
INSTRUCTIONS:
Give the necessary
Indicate the net change in income as a result of the foregoing adjustments.
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