Q.7 From the following Trial Balance, you are required to prepare Trading and Profit & Loss A/c for the year ending 31" March,2018 and a Balance Sheet as on that date: Rs
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.
![Q.7 From the following Trial Balance, you are required to prepare Trading and Profit & Loss A/c for the
year ending 31" March,2018 and a Balance Sheet as on that date:
Rs.
Rs.
Opening Stock
Furniture
25,000 Sales
16,000 Creditors
5,55,300 Bank Overdraft
4,700 Provision for Bad and Doubtful debts
1,800 Discount
52,000 Capital
80,000 Purchase Returns
15,000
22,000
3,400
68,000
8,900
14,000
1,60,000
10,000
7,000
10,43,100
7,00,000
70,500
50,000
2,100
500
2,00,000
20,000
Purchases
Carriage Inwards
Bad Debts
Wages
Debtors
Sales Returns
Rent
Misc. Expenses
Salaries
Cash
Drawings
Buildings
Advertising
Interest on Bank Overdraft
10,43,100
Adjustments:
(i) Closing stock is valued at Rs.36,000.
(ii) Rent is paid @ Rs.2,000 per month.
(iii) Private purchases amounting to Rs.5,000 have been debited to purchases account.
(iv) Make a provision for bad & doubtful debts at 5% on debtors.
(V) A new sign board costing Rs.4,000 IS ncluded in Advertising.
(vi) Depreciate Furniture & Fittings by 10%.
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