PROBLEM SOLVING 2 The following is trial balance of Key. E.Kepe as of December 31, 2020: Cash Accounts Receivable Allowances for bad debts Prepaid Insurance Merchandise Inventory (Jan. 01) Supplies Land KEY E. KEPE COMPANY TRIAL BALANCE YEAR ENDED DECEMBER 31, 2020 Debit P2,000,000 420,000 Building Accumulated depreciation - Building Machineries Accumulated depreciation- Machineries Equipment Accumulated depreciation-Equipment Goodwill Accounts payable Notes payable Bank payable-short term Mortgage payable-short term Bank payable-long term Bond payable Papa, Capital Papa, Withdrawal Sales Sales discount Sales returns and allowances Purchases Purchases discount Purchases returns and allowances Freight-in Taxes and licenses expense Supplies expense Insurance expense Salaries expense Utilities expense Depreciation-building Depreciation-machineries Depreciation-Equipment Merchandise inventory (December 31) Other income Requirements: Compute for the following: a. Gross sales b. Net sales d. Gross purchases e. Net purchases f. Cost of sales g. Total revenue h. Net Income 500,000 250,000 30,000 620,000 320,000 120,000 50,000 400,000 142,000 20.000 25,000 350,000 22,000 10,000 10,000 250,000 38,000 24,000 20,000 30,000 5,000 250,000 Credit P20,000 20,000 30,000 5,000 200,000 250,000 185,000 528,000 220,000 130,000 2,000,000 1,500,000 20,000 50,000 214,000
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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