Question Jean Fit is the owner of Move-It, a distributor and retailer of home fitness equipment. The following trial balance has been extracted from her business records as at 30 June 2020: Unadjusted Trial Balance as at 30 June 2020 Dr (S) Cr (S) Account Advertising expense 26,880 Salaries expense 157,320 Interest expense 4,500 Returns 17,760 22,940 Drawings: Jean Fit 33,520 Capital: Jean Fit 400,000 Building, at cost 930,500 Equipment, at cost 425,800 Interest income 24,150 Trade payables 215,900 Accumulated depreciation as at 1 July 2019 - Building - Equipment 186,100 106,450 Inventory as at 1 July 2019 183,600 Purchases 906,300 Commission income 38,920 Sales 2,067,100 Rent expense 148,800 Cash at bank 94,560 Carriage inwards 20,600 Discounts 16,340 10,270 Insurance expense 63,600 Carriage outwards 23,450 Utilities expense 40,200 Trade receivables 278,100 6% Bank loan, repayable in 2026 300,000 3,371,830 3,371,830
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.
Please classify current assets fixed assets current liabilites and non current liabilities in this two picture
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