Required: 1. Prepare an income statement. Gorman Group Income Statement For the Year Ended October 31, 2019 Revenues: $ Total revenues $ Expenses: $ Total expenses Net income $ Prepare a statement of owner's equity (no additional investments were made during the year). Gorman Group Statement of Owner's Equity For the Year Ended October 31, 2019 $ $ $ Prepare a balance sheet. Gorman Group Balance Sheet October 31, 2019 Assets Liabilities Current assets: Current liabilities: $ $ Total liabilities $ Total current assets $ Property, plant, and equipment: Owner's Equity $ $ $ Total property, plant, and equipment Total assets $ Total liabilities and owner's equity $ 2. Journalize the entries that were required to close the accounts at October 31. For a compound transaction, if an amount box does not require an entry, leave it blank. Date Account Debit Credit Oct. 31 Oct. 31 3. If the balance of Nicole Gorman, Capital had instead increased $115,000 after the closing entries were posted and the withdrawals remained the same, what would have been the amount of net income or net loss? $ 2. PR.04-05A.BLANKSHEET.PART.1 3. MP.04-01.BLANKSHEET.ALGO
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.
The Gorman Group is a financial planning services firm owned and operated by Nicole Gorman. As of October 31, 2019, the end of the fiscal year, the accountant for The Gorman Group prepared an end-of-period spreadsheet, part of which follows:
| The Gorman Group End-of-Period Spreadsheet For the Year Ended October 31, 2019 |
||
| Adjusted |
||
| Account Title | Dr. | Cr. |
| Cash | 14,730 | |
| 32,060 | ||
| Supplies | 5,010 | |
| Prepaid Insurance | 10,820 | |
| Land | 114,000 | |
| Buildings | 410,000 | |
| 133,500 | ||
| Equipment | 296,000 | |
| Accumulated Depreciation-Equipment | 173,800 | |
| Accounts Payable | 37,930 | |
| Salaries Payable | 3,760 | |
| Unearned Rent | 1,700 | |
| Nicole Gorman, Capital | 486,900 | |
| Nicole Gorman, Drawing | 28,500 | |
| Service Fees | 540,830 | |
| Rent Revenue | 5,710 | |
| Salaries Expense | 387,720 | |
| Depreciation Expense—Equipment | 21,000 | |
| Rent Expense | 17,600 | |
| Supplies Expense | 12,470 | |
| Utilities Expense | 11,270 | |
| Depreciation Expense—Buildings | 7,520 | |
| Repairs Expense | 6,210 | |
| Insurance Expense | 3,410 | |
| Miscellaneous Expense | 5,810 | |
| 1,384,130 | 1,384,130 |
Required:
1. Prepare an income statement.
| Gorman Group Income Statement For the Year Ended October 31, 2019 |
||
|---|---|---|
| Revenues: | ||
| $ | ||
| Total revenues | $ | |
| Expenses: | ||
| $ | ||
| Total expenses | ||
| Net income | $ |
Prepare a statement of owner's equity (no additional investments were made during the year).
| Gorman Group Statement of Owner's Equity For the Year Ended October 31, 2019 |
||
|---|---|---|
| $ | ||
| $ | ||
| $ |
Prepare a
| Gorman Group Balance Sheet October 31, 2019 |
||||||
|---|---|---|---|---|---|---|
| Assets | Liabilities | |||||
| Current assets: | Current liabilities: | |||||
| $ | $ | |||||
| Total liabilities | $ | |||||
| Total current assets | $ | |||||
| Property, plant, and equipment: | Owner's Equity | |||||
| $ | ||||||
| $ | ||||||
| $ | ||||||
| Total property, plant, and equipment | ||||||
| Total assets | $ | Total liabilities and owner's equity | $ |
2.
| Date | Account | Debit | Credit |
|---|---|---|---|
| Oct. 31 | |||
| Oct. 31 | |||
3. If the balance of Nicole Gorman, Capital had instead increased $115,000 after the closing entries were posted and the withdrawals remained the same, what would have been the amount of net income or net loss?
$
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