Part III - Preparing Financial Statements Spartonians, Inc. Trial Balance FYE September 30, 2022 101 Cash 105 Accounts Receivable 106 Allowance for Doubtful Accts 110 Inventory 120 Prepaid Supplies 185 Equipment 187 Accumulated Depreciation 190 Patents 205 Accounts Payable 210 Unearned Service Revenue 250 Salaries Payable 255 260 Accrued Vacation Payable Bonds Payable 301 Common Stock 305 Additional Paid in Capital 310 Retained Earnings 315 Dividends 410 Sales Revenue 505 Cost of Goods Sold 510 Advertising Expense 520 Depreciation Expense Insurance Expense 545 560 Rent Expense 570 Utilities Expense Dr $ 183,600 135,000 55,000 19,000 125,000 200,000 5,025 120,000 5,000 10,000 8,000 12,000 10,000 S 887.625 Cr 3 $ 10,000 85,000 25,525 15,000 5,500 7,400 270,500 50,000 150,000 33,700 235,000 $ 887.625 Instructions - Prepare the following financial statements in proper form: 1. A multiple step Income Statement 2. The Statement of Retained Earnings 3. A classified Balance Sheet
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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