On September 1, 2020, the account balances of Tom Cruise Repair, Inc. were as follows. No Debit No Credit 101 Cash £4,880 158 Accumulated DepreciationEquipment £2,100 112 Accounts Receivable 3,520 201 Accounts Payable 3,400 126 Supplies 2,000 209 Unearned Service Revenue 1,400 157 Equipment 18,000 212 Salaries and Wages Payable 500 311 Share Capital-Ordinary 10,000 320 Retained Earnings 11,000 £28,400 £28,400 During September, the following summary transactions were completed. Sept. 8 Paid £1,700 for salaries due employees, of which £1,200 is for September. 10 Received £1,200 cash from customers on account. 12 Received £3,400 cash for services performed in September. 15 Purchased store equipment on account £3,000. 17 Purchased supplies on account £1,200. 20 Paid creditors £4,500 on account. 22 Paid September rent £500. 25 Paid salaries £1,050. 27 Performed services on account and billed customers for services provided £1,600. 29 Received £750 from customers for future service. Adjustment data consist of: 1. Supplies on hand £1,700. 2. Accrued salaries payable £400. 3. Depreciation is £140 per month. 4. Unearned service revenue of £1,450 is recognized for services performed. Instructions (a) Enter the September 1 balances in the ledger accounts. (b) Journalize the September transactions. (c) Post to the ledger accounts. Use J1 for the posting reference. Use the following additional accounts: No. 400 Service Revenue, No. 631 Supplies Expense, No. 711 Depreciation Expense, No. 726 Salaries and Wages Expense, and No. 729 Rent Expense. (d) Prepare a trial balance at September 30. (e) Journalize and post adjusting entries. (f) Prepare an adjusted trial balance. (g) Prepare an income statement and a retained earnings statement for September and a statement of financial position at September 30.
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 September 1, 2020, the account balances of Tom Cruise Repair, Inc. were as
follows.
No Debit No Credit
101 Cash £4,880 158 Accumulated DepreciationEquipment
£2,100
112 Accounts
Receivable
3,520 201 Accounts Payable 3,400
126 Supplies 2,000 209 Unearned Service Revenue 1,400
157 Equipment 18,000 212 Salaries and Wages Payable 500
311 Share Capital-Ordinary 10,000
320
£28,400 £28,400
During September, the following summary transactions were completed.
Sept. 8 Paid £1,700 for salaries due employees, of which £1,200 is for September.
10 Received £1,200 cash from customers on account.
12 Received £3,400 cash for services performed in September.
15 Purchased store equipment on account £3,000.
17 Purchased supplies on account £1,200.
20 Paid creditors £4,500 on account.
22 Paid September rent £500.
25 Paid salaries £1,050.
27 Performed services on account and billed customers for services provided
£1,600.
29 Received £750 from customers for future service.
Adjustment data consist of:
1. Supplies on hand £1,700.
2. Accrued salaries payable £400.
3.
4. Unearned service revenue of £1,450 is recognized for services performed.
Instructions
(a) Enter the September 1 balances in the ledger accounts.
(b) Journalize the September transactions.
(c) Post to the ledger accounts. Use J1 for the posting reference. Use the following
additional accounts: No. 400 Service Revenue, No. 631 Supplies Expense, No. 711
Depreciation Expense, No. 726 Salaries and Wages Expense, and No. 729 Rent
Expense.
(d) Prepare a
(e) Journalize and post
(f) Prepare an adjusted trial balance.
(g) Prepare an income statement and a retained earnings statement for September and a
statement of financial position at September 30.
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