Property, plant and equipment 528 447 Development costs 110 93 638 540 Current assets Inventory 413 380 Trade Receivables 238 215 Investments 28 - Cash 111 4 790 599 Total Assets 1,428 1,139 Equity and liabilities Ordinary shares of $1 each 240 200 Share Premium 140 120 Revaluation Surplus 100 - Retained Earnings 538 530 1,018 850 Non-current liabilities Provision for warranties 30 25 6% Debentures 150 - 180 25 Current liabilities Income Tax Payables 37 32 Trade Payables 193 232 230 264 Total Equity and Liabilities 1,428 1,139
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.
- Below are Financial Positionsstatement for Dawson Co at 31 December 2015 and 31 December 2016 and the Statement of Comprehensive Income for the year ended 31 December 2016.
Statement of Comprehensive Income for the year ended 31 December 2016
|
|
2016 |
|
|
$ 000 |
|
Revenue |
900 |
|
Cost of sales |
(550) |
|
Gross profit |
350 |
|
Expenses |
(245) |
|
Finance Costs |
(9) |
|
Profit on sale of equipment |
7 |
|
Profit before tax |
103 |
|
Income tax expense |
(30) |
|
Profit for the period |
73 |
|
|
|
|
|
2016 |
2015 |
|
|
$ 000 |
$ 000 |
|
Non-current assets: |
|
|
|
Property, plant and equipment |
528 |
447 |
|
Development costs |
110 |
93 |
|
|
638 |
540 |
|
Current assets |
|
|
|
Inventory |
413 |
380 |
|
Trade Receivables |
238 |
215 |
|
Investments |
28 |
- |
|
Cash |
111 |
4 |
|
|
790 |
599 |
|
Total Assets |
1,428 |
1,139 |
|
Equity and liabilities |
|
|
|
Ordinary shares of $1 each |
240 |
200 |
|
Share Premium |
140 |
120 |
|
Revaluation Surplus |
100 |
- |
|
|
538 |
530 |
|
|
1,018 |
850 |
|
Non-current liabilities |
|
|
|
Provision for warranties |
30 |
25 |
|
6% Debentures |
150 |
- |
|
|
180 |
25 |
|
Current liabilities |
|
|
|
Income Tax Payables |
37 |
32 |
|
Trade Payables |
193 |
232 |
|
|
230 |
264 |
|
Total Equity and Liabilities |
1,428 |
1,139 |
Notes:
- Deferred development expenditure amortised during 2016was $25,000.
- Additions to property, plant and equipment totalling $167,000 were made. Proceeds from the sale of equipment were $58,000, giving rise to a profit of $7,000. No other items of property, plant and equipment were disposed of during the year.
- Finance costs represent interest paid on the new 6% debentures 2010-2012issued on 1 January 2016.
- Current asset investments represent treasury bills acquired. The company deems these to represent cash equivalents.
- Dividends paid during the year amounted to $65,000.
- Expenses include wages paid of $44,000 and
bad debts of $12,000.
Required
Prepare a
Step by step
Solved in 3 steps
