QUESTION 3 REQUIRED Use the information provided below to prepare the Statement of Financial Position of Umran Limited as at 30 June 2022. The notes to the financial statements are not required. INFORMATION The following balances were obtained from the accounting records of Umran Limited after all the adjustments and closing transfers were completed on 30 June 2022, the end of the financial year. Inventory Debtors control Loan: Lendor Bank Equipment Accumulated depreciation on equipment Cash float Creditors control Provision for bad debts Accrued income Ordinary share capital (200 000 shares) Retained earnings South African Revenue Services: Company tax payable Bank (DR) Accrued expenses Shareholders for dividends/Dividends payable 2 Additional information The tax calculated on the pre-tax profit for the year amounted to R180 000. Provisional company tax payments for the year ended 30 June 2022 totalled R156 000. Dividends for the year. 21 2.2 3. R 420 000 120 000 300 000 2 640 000 240 000 18 000 272 000 ? 12 000 1548 000 720 000 4 132 000 84 000 Interim dividend paid on 31 December 2021: 40 cents per share. Final dividend declared on 30 June 2022: 74 cents per share. The provision for bad debts balance on 30 June 2021 was R5 000. The provision for bad debts is calculated at 5% of book debts. Payments totalling R76 000 to Lendor Bank, including R36 000 for interest, will be made during the next financial year.
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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