Prepare the adjusting entries. Prepare the Dec. 1, 2021 entry to record the payment of the salaries.
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.
The Piper Ventura Illustrators presented the following information pertaining to accounts that will need adjustments for its Nov. 30, 2021 year-end financial statements.
- a) On Oct. 1, 2021, Piper paid P10,800 for 6-months’ insurance premiums.
- b) The balance in the ledger account Office Supplies amounted to P32,000. A count of the office supplies on Nov. 30, 2021 totaled P12,800.
- c) The company received P22,800 on 1, 2021 from a customer for services to be rendered during the months of November, December, January, and February.
- d) Piper Ventura acquired Office Equipment costing P352,800 on April 1, The
equipment is expected to last 5 years after which it will be worthless.
- e) Assume that Nov. 30, 2021 is a Friday and the Piper pays its employees a total of P87,500 on Saturday.
- f) On September 1, the entity completed the negotiations with a client and accepted an advance of P168,000 for services to be performed on The P168,000 was credited to Unearned Service Revenues on the date of transaction.
- g) Among the liabilities of the entity is a note payable in the amount of P3,000,000. On
November 30, the accrued interest on this note amounted to P150,000.
Required:
- Prepare the
adjusting entries .
- Prepare the Dec. 1, 2021 entry to record the payment of the salaries.
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