Required: Use the information in the adjusted trial balance to prepare (a) the income statement for the year ended December 31; (b) the statement of retained earnings for the year ended December 31 [Note: Retained Earnings at December 31 of the prior year was $239,220]; and (c) the balance sheet as of December 31. Complete this question by entering your answers in the tabs below.
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.
![Required:
Use the information in the adjusted trial balance to prepare (a) the income statement for the year ended December 31; (b) the
statement of retained earnings for the year ended December 31 [Note: Retained Earnings at December 31 of the prior year was
$239,220]; and (c) the balance sheet as of December 31.
Complete this question by entering your answers in the tabs below.
Required A Required B
Required C
Prepare Chiara Company's balance sheet as of December 31.
CHIARA COMPANY
Balance Sheet
December 31
Assets
Cash
Accounts receivable
Office supplies
Interest receivable
Notes receivable
Automobiles
Accumulated depreciation-Automobiles
Equipment
Depreciation expense Automobiles
Expenses
$
0
0
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The adjusted trial balance for Chiara Company as of December 31 follows.
@
Cash
Accounts receivable.
Interest receivable
2
Notes receivable (due in 90 days)
Office supplies
Automobiles
Accumulated depreciation-Automobiles
Equipment
Accumulated depreciation-Equipment
Land
Accounts payable
Interest payable
Salaries payable
Unearned revenue
Long-term notes payable
Common stock
Retained earnings
Dividends
Services
Interest
revenue
revenue
Depreciation expense-Automobiles
Depreciation expense-Equipment
Salaries expense
Wages expense
Interest expense
office supplies expense
Advertising expense
Repairs expense-Automobiles
Totals
3
с
Debit
$ 145,400
52,000
21,600
171,500
$
4
15,500
171,000
134,000
86,000
53,000
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Required:
Use the information in the adjusted trial balance to prepare (a) the income statement for the year ended Decemb
statement of retained earnings for the year ended December 31 [Note: Retained Earnings at December 31 of the F
$239,220]; and (c) the balance sheet as of December 31.
Credit
$ 105,000
27,000
106,000
30,000
22,000
42,000
148,000
26,580
239,220
504,000
36,000
25,000
20,000
183,000
43,000
37,000
35,200
64,000
28,600
$ 1,285,800 $ 1,285,800
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