Question 1 The Profit & Loss of Mobile Dealer for the previous year ending on 31st March 2021 is given below Particulars Amount Particulars Amount Rent Paid 90,000 Gross Profit 9,43,500 Salaries 6,32,000 Rent of Let out House 1,20,000 Diwali & Puja Expenses 12,000 Hire Charges of Mobile 2,59,500 Interest on Loan 1,20,000 Sundry Income 26,000 Sundry Expenses 67,000 Commission 37,000 Bad Debts 7,500 Charities 11,000 Bad Debt Reserves 22,000 Local Rates 6,000 Entertainment Exps 8,500 Loss by Fire 14,000 Net Profit 3,96,000 13,86,000 13,86,000 You are required to compute the Taxable Business income of the Taxable Business for the assessment year 2014-15 after taking into account the following information: 1) "Rent paid' includes Rs. 12,000 in respect of the shop owned by the assessee. 2) Salaries includes Rs. 96,000 paid to the assessee's graduate son for rendering part-time services the business. 3) "Interest on loan' includes Rs. 25,000-paid as interest on a loan taken from the assessee's wife. 4) The assessee has also earned Rs. 1,60,00o on sale of smuggled mobiles, which has not been shown in the above Profit & Loss A/c. 5) "Local rates includes Rs. 3,000 in respect let-out house property
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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