Roshaun Gould started a web consulting firm called Gould Solutions. He began operations and completedseven transactions in April that resulted in the following accounts, which all have normal balances. Cash . . . . . . . . . . . . . . . . . . $20,000Office supplies. . . . . . . . . . 750Prepaid rent . . . . . . . . . . . . 1,800Office equipment. . . . . . . $12,250Accounts payable. . . . . . . 12,250R. Gould, Capital. . . . . . . . 15,000R. Gould, Withdrawals. . . . . . . . . $ 5,200Consulting fees earned . . . . . . . . 20,400Miscellaneous expenses . . . . . . . 7,650 Required 1. Prepare a trial balance for this business as of the end of April. 2. The following seven transactions produced the account balances shown above. a. Gould invested $15,000 cash in the business. b. Paid $1,800 cash in advance for next month’s rent expense. c. Paid $7,650 cash for miscellaneous expenses. d. Purchased office supplies for $750 cash. e. Purchased $12,250 of office equipment on credit (with accounts payable). f. Received $20,400 cash for consulting services provided in April. g. Gould withdrew $5,200 cash for personal use. Prepare a Cash T-account, enter the cash effects (if any) of each transaction, and compute the ending Cash balance. Code each entry in the T-account with one of the transaction codes a through g.
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.
Roshaun Gould started a web consulting firm called Gould Solutions. He began operations and completed
seven transactions in April that resulted in the following accounts, which all have normal balances. Cash . . . . . . . . . . . . . . . . . . $20,000
Office supplies. . . . . . . . . . 750
Prepaid rent . . . . . . . . . . . . 1,800
Office equipment. . . . . . . $12,250
Accounts payable. . . . . . . 12,250
R. Gould, Capital. . . . . . . . 15,000
R. Gould, Withdrawals. . . . . . . . . $ 5,200
Consulting fees earned . . . . . . . . 20,400
Miscellaneous expenses . . . . . . . 7,650 Required
1. Prepare a
2. The following seven transactions produced the account balances shown above.
a. Gould invested $15,000 cash in the business.
b. Paid $1,800 cash in advance for next month’s rent expense.
c. Paid $7,650 cash for miscellaneous expenses.
d. Purchased office supplies for $750 cash.
e. Purchased $12,250 of office equipment on credit (with accounts payable).
f. Received $20,400 cash for consulting services provided in April.
g. Gould withdrew $5,200 cash for personal use.
Prepare a Cash T-account, enter the cash effects (if any) of each transaction, and compute the ending
Cash balance. Code each entry in the T-account with one of the transaction codes a through g.
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