Roth Contractors Corporation was incorporated on December 1, 2019 and had the following transactions during December: Part A a. Issued common stock for $5,000 cash b. Paid $1,200 cash for three months’ rent: December 2019; January and February 2020 c. Purchased a used truck for $10,000 on credit (recorded as an account payable) d. Purchased $1,000 of supplies on credit. These are expected to be used during the month (recorded as expense) e. Paid $1,800 for a one-year truck insurance policy, effective December 1 f. Billed a customer $4,500 for work completed to date g. Collected $800 for work completed to date h. Paid the following expenses in cash: advertising, $350; interest, $100; telephone, $75; truck operating, $425; wages, $2,500 i. Collected $2,000 of the amount billed in f above j. Billed customers $6,500 for work completed to date k. Signed a $9,000 contract for work to be performed in January 2020 l. Paid the following expenses in cash: advertising, $200; interest, $150; truck operating, $375; wages, $2,500 m. Collected a $2,000 advance on work to be done in January (the policy of the corporation is to record such advances as revenue at the time they are received) n. Received a bill for $100 for electricity used during the month (recorded as utilities expense). Prepare journal entries to record the December transactions and post the entries to general ledger T-accounts. General ledger account numbers and descriptions are not needed.
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.
Roth Contractors Corporation was incorporated on December 1, 2019
and had the following transactions during December:
Part A
a. Issued common stock for $5,000 cash
b. Paid $1,200 cash for three months’ rent: December 2019;
January and February 2020
c. Purchased a used truck for $10,000 on credit (recorded as an
account payable)
d. Purchased $1,000 of supplies on credit. These are expected to
be used during the month (recorded as expense)
e. Paid $1,800 for a one-year truck insurance policy, effective
December 1
f. Billed a customer $4,500 for work completed to date
g. Collected $800 for work completed to date
h. Paid the following expenses in cash: advertising, $350; interest,
$100; telephone, $75; truck operating, $425; wages, $2,500
i. Collected $2,000 of the amount billed in f above
j. Billed customers $6,500 for work completed to date
k. Signed a $9,000 contract for work to be performed in January
2020
l. Paid the following expenses in cash: advertising, $200; interest,
$150; truck operating, $375; wages, $2,500
m. Collected a $2,000 advance on work to be done in January (the
policy of the corporation is to record such advances as revenue
at the time they are received)
n. Received a bill for $100 for electricity used during the month
(recorded as utilities expense).
Prepare
General ledger account numbers and descriptions are not needed.
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