Required information [The following information applies to the questions displayed below.] As of December 31 of the current year, Armani Company's records show the following. Cash Accounts receivable. Supplies Equipment Accounts payable Common stock Retained earnings, December 31, prior year Retained earnings, December 31, current year Dividends Consulting revenue Rental revenue Salaries expense Rent expense Selling and administrative expenses Revenues Required: Prepare the income statement for Armani Company for the current year ended December 31. Total revenues Expenses Total expenses $ 11,300 10,300 7,300 6,300 13,600 15,300 4,300 6,300 14,300 35,600 24,600 ARMANI COMPANY Income Statement For Current Year Ended December 31 21,300 13,300 9,300 $ 0 0
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.
![**Educational Content: Armani Company's Financial Overview**
**Required Information:**
As of December 31 of the current year, Armani Company's records show the following:
- **Cash:** $11,300
- **Accounts receivable:** $16,300
- **Supplies:** $7,300
- **Equipment:** $6,300
- **Accounts payable:** $13,600
- **Common stock:** $15,300
- **Retained earnings, December 31, prior year:** $4,300
- **Retained earnings, December 31, current year:** $6,300
- **Dividends:** $14,300
- **Consulting revenue:** $35,600
- **Rental revenue:** $24,600
- **Salaries expense:** $21,300
- **Rent expense:** $13,300
- **Selling and administrative expenses:** $9,300
**Income Statement Preparation:**
The second section requires the preparation of an income statement for Armani Company for the current year ended December 31. The income statement is structured as follows:
**ARMAI COMPANY**
**Income Statement**
**For Current Year Ended December 31**
- **Revenues:**
- [Consulting revenue]
- [Rental revenue]
- _Total Revenues:_ $0
- **Expenses:**
- [Salaries expense]
- [Rent expense]
- [Selling and administrative expenses]
- _Total Expenses:_ $0
The income statement form will involve entering specific values into the brackets for consulting revenue, rental revenue, salaries expense, rent expense, and selling and administrative expenses, and then calculating the total revenues and total expenses.
This layout is fundamental for teaching financial accounting basics, demonstrating how to organize and prepare key financial statements.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff4f4865a-ef7d-48b6-9e5b-0e85084b2d7c%2F5dd9a139-34d4-448e-b78d-bc62228dd1cb%2F8szwem_processed.jpeg&w=3840&q=75)
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