Q No 1 Hassan textile anticipates reaching a sales level of Rs. 6 million in one year. The company expects earnings after taxes during the next year to equal Rs.400, 000. During the past several years, the company has been paying Rs.50, 000 in dividends to its stockholders. The company expects to continue this policy for at least the next year. The actual balance sheet and income statement for Hassan textile during 2018 follow. Hassan textile Ltd. Balance Sheet as of December 2018 Rs 200,000 Account Receivables 400,000 1,200,000 Rs. 600,000 500,000 200,000 Cash Accounts payable Notes payable Long-term debt Inventories Fixed Assets, net 500,000 Stockholders' equity 1,000,000 Rs. 2,300,000 Total Assets Rs. 2,300,000 Total liabilities and equity Hassan textile Ltd. Income Statement for the Year ending December 2018 Rs. 4,000,000 Rs. 3,700,000 Rs. 300,000 Sales Expenses, including interest and taxes Earnings after taxes Using the percentage of sales method, calculate the additional financing Hassan textiles Ltd. will need over the next year at the Rs. 6 million sales level. Show the pro forma balance sheet for the company as of December 31, 2019, a assuming that a sales level of Rs. 6 million is reached. Assume that the additional financing needed is obtained in the form of additional notes payable. • If the Hassan textile's banker requires the company to maintain a current ratio equal to 1.6 or greater, what is the maximum amount of additional financing that can be in the form of bank borrowings (notes payable)? What other potential sources of financing are available to the company
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
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