Prepare the following for the year ended 31 December 2020 i. Accounts payable and accounts receivables accounts ii. Income statement iii. 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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3. All cash and cheques received were paid into the bank account immediately. Janet
estimates the following receipts for the year
Cheque received from trade receivables $194,500
Cash Sales
$ 32,700
4. Depreciation is to be written-off the buildings at 20% per annum and Fixtures and Fitting
at 10 % per annum.
5. At December 31, 2020, building expenses owing was $4,582, and insurance paid in
advance was $5,354.
6. Included in the amount paid for Fixtures and fittings were:
A table bought for $2,600, which Janet resold during the year at cost, some wooden
shelving (cost $1,500), which Janet used in building an extension to her personal garage.
7. Cheque written for personal use during the year amounted to $43,000
8. Other balances at 31 December 31, 2020 were:
2$
Trade accounts receivable
23,042
19,890
28,126|
Trade accounts payable
Inventory of furniture
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![SECTION A
Janet Wilson has run a furniture business for many years, but has never kept adequate
accounting records. However, a need to obtain a loan for the expansion of the business has
necessitated the preparation of the final accounts for the year ended December 31, 2020. She
is seeking your help in the preparation of the statements.
1. Janet is able to provide you with the following information about her financial position
at January 1, 2020: inventory of furniture $21,420; Trade accounts receivable $20,286;
Trade accounts payable $18,196; Buildings $25,200; Fixtures and Fittings $23,400,
building expenses owing $4864, insurance prepaid $ 4,000, bank $8,840
2. Cheques drawn during the year were estimated as follows:
Trade payables
Electricity
Telephone
54,843
12,180
11,220
Rent
15,500
13,360
15,600
12,392
14,732
Advertising & Promotion
Fixtures and Fittings
Insurance
Building expenses
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