Presented below is the December 31 trial balance of Metlock Boutique. METLOCK BOUTIQUE TRIAL BALANCE DECEMBER 31 Debit Credit Cash $25,800 Accounts Receivable 32,700 Allowance for Doubtful Accounts $747 Inventory, December 31 83,530 Prepaid Insurance 6,660 Equipment 98,000 Accumulated Depreciation—Equipment 38,000 Notes Payable 28,790 Common Stock 76,402 Retained Earnings 9,760 Sales Revenue 730,451 Cost of Goods Sold 492,200 Salaries and Wages Expense (sales) 62,400 Advertising Expense 7,670 Salaries and Wages Expense (administrative) 69,810 Supplies Expense 5,380 $884,150 $884,150 Prepare adjusting journal entries for the following. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.) 1. Bad debt expense is estimated to be $1,306. 2. Equipment is depreciated based on a 7-year life (no salvage value). 3. Insurance expired during the year $2,506. 4. Interest accrued on notes payable $3,114. 5. Sales salaries and wages earned but not paid $2,373. 6. Advertising paid in advance $747. 7. Office supplies on hand $1,420, charged to Supplies Expense when purchased. Post closing entries. (Post entries in the order of journal entries presented in the previous part.) and income summary.
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.
Presented below is the December 31
METLOCK BOUTIQUE
TRIAL BALANCE
DECEMBER 31
Debit
Credit
Cash $25,800
Allowance for Doubtful Accounts $747
Inventory, December 31 83,530
Prepaid Insurance 6,660
Equipment 98,000
Notes Payable 28,790
Common Stock 76,402
Retained Earnings 9,760
Sales Revenue 730,451
Cost of Goods Sold 492,200
Salaries and Wages Expense (sales) 62,400
Advertising Expense 7,670
Salaries and Wages Expense (administrative) 69,810
Supplies Expense 5,380
$884,150
$884,150
Prepare
| 1. | ||
| 2. | Equipment is |
|
| 3. | Insurance expired during the year $2,506. | |
| 4. | Interest accrued on notes payable $3,114. | |
| 5. | Sales salaries and wages earned but not paid $2,373. | |
| 6. | Advertising paid in advance $747. | |
| 7. | Office supplies on hand $1,420, charged to Supplies Expense when purchased. |
Post closing entries. (
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