Prepare a balance sheet with the information below Debit Credit $ $ Sales 1,000,000 Sales returns 10,000 Selling expenses 150,000 Administration expenses 205,000 Financial expenses 50,000 Purchases 320,000 Cash at bank 77,000 Accounts receivable 22,000 Provision for Doubtful Debts 2,500 Inventories 42,000 Motor Vehicles 80,000 Furniture 42,000 Plant and Equipment 276,500 Accumulated Depreciation Plant 1,500 Accounts payable 56,000 Bank Loan 12,000 Capital - Bennett 75,000 Capital - Barney 112,500 Current - Bennett 25,000 Current - Barney 35,000 Drawings - Bennett 20,000 Drawings - Barney 25,000
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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