QUESTION The following trial balance has been extracted from the books of W, F and M on 31/12/2022 Debit Credit K K Fixecapital W 10, 000 F 8,000 M 6,000 Current accounts W 4,000 F 500 M 2,000 Long - term loans 5,000 Plant and equipment 15,000 Vehicles 8,000 Debtors 29,000 Creditors 12,000 Stock at 1/1/2022 15,500 Bank 3,000 Sales 250,000 Wages 50,000 Purchases 125,000 Rent and rates 5,000 Other costs 35,000 Salaries W 6,000 F 3,000 M 2,000 297, 000 297,000 The following information is also available: (a) The profit sharing ratio is 3:2:1 for W, fand m respectively (b) All assets are to be depreciated by 20%. (c) Closing stock has a value of K18, 000. (d) All capital transactions are to be conducted through the partners'current accounts. (e) At the year end, the partners agreed to increase each fixed capital account by 10% by transfereing funds from their current accounts. REQUIRED: Prepare the financial accounts of the partnership for the year to 31/12/2022
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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