PART A: PREPARATION OF CASH FLOW STATEMENT The following are the financial statements of Viral Bhd: Viral Bhd Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2021 RM Turnover 1,164, 160 Cost of Sales (853,000) 311,160 Gross Profits Gain on disposal of motor vehicles Administrative expenses Selling and distribution expenses 15,580 (145,380) (28,000) 45,800 Investment income (23,000) 176,160 (44,040) 132,120 Interest expenses Profit before tax Tax charge for the year Profit for the year Viral Bhd Statement of Financial Position as at 31 December . 2020 2021 RM RM Non-Current Assets Property plant and equipment (note 1) 320,220 323,000 1,340,000 Investments 804,000 Current Assets 66,000 123,800 78,700 144,050 333,340 Inventories Account receivables 102,700 77,000 2,032,500 Bank 571,280 2,251,590 Short term fixed deposit Equity and Liabilities Ordinary Share Capital Retained Earnings 1,650,000 1,900,000 172,200 228,570 Non-Current Liabilities 10% Bank Loan 90,000 45,000 Current Liabilities 78,450 10,200 13,000 18,650 36,370 11,000 Account payables Tax payables Dividend payables Accrued expenses 27,000 3,650 2,032,500 2,251,590
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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