Q3: Prepare Income Statement and Balance Sheet from the following Trial Balance Saadab. Mersbandtized Company Trial Balance June 2019 Debit Credit Cash 20000 Machinery 16000 Accumulated depreciation 4000 Opening Inventory 30000 Accounts payable 7000 Capital 44000 Service Revenue 8000 Sales 20000 Purchases 9000 Telephone Expenses 8000 Total 83000 83000 Adjustment information: 1] Depreciation for the year is RO 2000 2] Closing Inventory for merchandise is RO 3400O 3] Accrued (outstanding) electrical expense is RO 120 4 Service revenue earned but not yet collected are RO 2000
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.
![Q3: Prepare Income Statement and Balance Sheet from the
following Trial Balance
Saadab. Mersbandized Company
Trial Balance June 2019
Debit
Credit
Cash
20000
Machinery
16000
Accumulated depreciation
4000
Opening Inventory
30000
Accounts payable
7000
Сapital
44000
Service Revenue
8000
Sales
20000
Purchases
9000
Telephone Expenses
8000
Total
83000
83000
Adjustment information:
1] Depreciation for the year is RO 2000
2] Closing Inventory for merchandise is RO 34000
3] Accrued (outstanding) electrical expense is RO 120
4 Service revenue earned but not yet collected are RO 2000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F368ced2d-6e7c-4744-995c-cbc71319b19b%2Fb7ef9422-f382-4f53-b2bb-f342b821028d%2Fl53t5nb_processed.jpeg&w=3840&q=75)
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