Q1: Using Figure 1 plus the additional information below, supplied by the accountants at INEOS Group, to help them complete the final accounts for the year ended 31 March 2022, complete the "Workings" for the Adjustments below and create an "Adjusted Trial Balance", Figure 1 INEOS Group Unadjusted Trial Balance as at 31 March 2022 Plant and Machinery: Cost Inventory at 01-04-21 5,000,000 135,258 Freehold Land and Buildings 6,400,000 Purchase Returns 86,329 Vehicles: Accumulated Depreciation at 01-04-21 301,000 Vehicles: Cost 550,000 Bank Loan (repayable on 31-01-25) 3,000,000 Trade Payables 512,325 Purchases 1,985,321 16,203,958 16,203,958 Additional Information: a) No depreciation had been charged in the current year. Plant & Machinery are to be charged at 27.5% Reducing Balance. () Vehicles are to be charged using a Straight-Line basis with a Life Expectancy of 6 years and an expected sale price of £98,500. Advertising Debit (£) Credit (£) 258,963 Total Shareholder Equity 4,250,000 Sales 4,275,235 Trade Receivables 585,210 Administration Expenses 42,873 Electric Expenses 71,259 Telephone Expenses 59,654 Sundry Expenses Motor Expenses 72,539 56,910 Bank Balance Sales Returns Retained Earnings at 01-04-21 Rent Wages 127,642 61,248 1,279,552 265,982 658,741 Plant and Machinery: Accumulated Depreciation at 01-04-21 2,371,875 Plant and Machinery: Cost 5,000,000
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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