Prepare any necessary transaction entries for 2022 and adjusting entries at December 31, 2022, using the financial statement effects template. HINT: Make all related entries for the transactions and adjustments on the same line in th Balance Sheet Income Statement Beginning balances 1 Record sales 2 Record inventory transactions 3 Record vendor payments 4 Record insurance transactions 5 Record wage transactions 6 Record depreciation Totals Cash Asset 12,750 T 12750 + Noncash Assets 34,950 34950 Contra Assets 4,500 4500 - Liabilities + Equity Revenues 7,950 35,250 7950 + 35250 0- Expenses 0- Net Income 0
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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![Preparing Adjusting Entries (FSET)
Fischer Card Shop is a small retail shop. Fischer's balance sheet at year-end 2021 is as follows:
FISCHER CARD SHOP
Balance Sheet
December 31, 2021
$12,750 Accounts payable
18,000 Wages payable
5,700 Total current liabilities
36,450
Cash
Inventories
Prepaid insurance
Total current assets
Equipment
$11,250
Less accumulated depreciation 4,500
Equipment, net
Total assets
$7,800
150
7,950
6,750 Total equity (including Retained Earnings) 35,250
$43,200
$43,200
The following information details transactions and adjustments that occurred during 2022.
1. Sales total $218,775 in 2022; all sales were cash sales
2. Inventory purchases total $114,300 in 2022; at December 31, 2022, inventory totals $21,750.
Assume all purchases were made on account.
3. Accounts payable totals $6,150 at December 31, 2022.
4. Annual insurance premiums of $36,000 were paid on March 1, 2022, covering the next
12 months. The balance in prepaid insurance at December 31, 2021, was the balance remaining
from the advance premium payment in 2021.
5. Wages are paid every other week on Friday; during 2022, Fischer paid $18,750 cash for wages.
At December 31, 2022, Fischer owed employees unpaid and recorded wages of $525.
6. Depreciation on equipment totals $2,550 in 2022.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6bfa4a1f-51a5-4efe-934e-7724bdb991d2%2F4a05d479-d864-4b9c-bfa3-5d96b3b55f12%2Fru3w8x_processed.png&w=3840&q=75)
![Prepare any necessary transaction entries for 2022 and adjusting entries at December 31, 2022, using the financial statement effects template. HINT: Make all related entries for the transactions and adjustments on the same line in the FSET.
Balance Sheet
Income Statement
Beginning balances
1 Record sales
2 Record inventory transactions
3 Record vendor payments
4 Record insurance transactions
5 Record wage transactions
6 Record depreciation
Totals
Cash
Asset
12,750
12750 +
Noncash
Assets
34,950
34950
Contra
Assets
4,500
=
4500 =
Liabilities + Equity Revenues
7,950
35,250
7950 +
35250
0
Expenses =
0 =
Net
Income
0](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6bfa4a1f-51a5-4efe-934e-7724bdb991d2%2F4a05d479-d864-4b9c-bfa3-5d96b3b55f12%2F2utwuui_processed.png&w=3840&q=75)
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