REQUIRED: Prepare Mr. Jim Jones's Balance Sheet as at December 31, 2020. (Trading and Profit & Loss account is not required). You must use Vertical Presentation Format for preparing the Balance Sheet.
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.
![QUESTION: 2
The following Trial balance was extracted from the book of Jim Jones a Sole Trader at December
31", 2020
DETAILS
Sales
Purchases
Carriage
Drawings
Rates, Rent, Insurance
Postage and Stationery
Salary and wages
Bad debts
Provision for bad debts
Debtors
Creditors
Cash in Hand
Cash at Bank
Stock (1 Jan)
Equipment at Cost
Accumulated Depreciation
Capital
TOTAL
DEBIT
The following matters are to be taken into account:
($)
82,350
5,144
7,800
E. The provision for bad debts is to be increased to $170
F. Stock as at 31" December has been valued at $13,551
6,622
3,001
26,420
877
12.120
1,507
1,002
11,927
58,000
53,091
216,770
CREDIT
A. Rent is accrued by $210
B. Rates have been prepaid by $880
C. $2,211 of the carriage represents carriage inwards on purchases
D. Equipment is to be depreciated at 15% per annum using the straight line method
(5)
138,078
130
6,471
19,000
216,770
G. During the year Jim withdrew goods valued $200 for his own use. No entry was recorded for
withdrawal in the books.
H. NET PROFIT for the period $7418
REQUIRED:
Prepare Mr. Jim Jones's Balance Sheet as at December 31, 2020. (Trading and Profit &
Loss account is not required).
You must use Vertical Presentation Format for preparing the Balance Sheet.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F91605255-8a3f-4f90-b4a0-4e9393375805%2F6208582f-e11a-4294-908b-30b47e72336a%2Fom61ie_processed.jpeg&w=3840&q=75)
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