Pastina Company sells various types of pasta to grocery chains as private label brands. The company's reporting year- end is December 31. The unadjusted trial balance as of December 31, 2021, appears below. Account Title Cash Debits Credits Accounts receivable Supplies Inventory Notes receivable 36, 100 43,400 3,200 63,400 23,400 Interest receivable 2,700 9,400 93,600 Prepaid insurance Office equipment Accumulated depreciation Accounts payable Salaries payable Notes payable Interest payable Deferred sales revenue Common stock Retained earnings Dividends Sales revenue Interest revenue 35,100 34,400 53,400 3,700 83,800 37,000 7,400 163,000 87,000 20,600 12,700 Cost of goods sold Salaries expense Rent expense Depreciation expense Interest expense Supplies expense Insurance expense Advertising expense Totals 2,800 4,700 410,400 410,400 Information necessary to prepare the year-end adjusting entries appears below. 1. Depreciation on the office equipment for the year is $11,700. 2. Employee salaries are paid twice a month, on the 22nd for salaries earned from the 1st through the 15th, and on the 7th of the following month for salaries earned from the 16th through the end of the month. Salaries earned from December 16 through December 31, 2021, were $1,650. 3. On October 1, 2021, Pastina borrowed $53,400 from a local bank and signed a note. The note requires interest to be paid annually on September 30 at 12%. The principal is due in 10 years. 4. On March 1, 2021, the company lent a supplier $23,400 and a note was signed requiring principal and interest at 8% to be paid on February 28, 2022. 5. On April 1, 2021, the company paid an insurance company $9,400 for a one-year fire insurance policy. The entire $9,400 was debited to prepaid insurance. 6. $980 of supplies remained on hand at December 31, 2021. 7. A customer paid Pastina $3,700 in December for 1,600 pounds of spaghetti to be delivered in January 2022. Pastina credited deferred sales revenue. 8. On December 1, 2021, $2,700 rent was paid to the owner of the building. The payment represented rent for December 2021 and January 2022 at $1,350 per month. The entire amount was debited to prepaid rent. 3. Prepare an adjusted trial balance. (Do not round intermediate calculations. Round your final answers to nearest whole dolla PASTINA COMPANY Adjusted Trial Balance December 31, 2021 Account Title Debits Credits Cash
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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