Rowland Company is a small editorial services company owned and operated by Marlene Rowland. On August 31, 2018, the end of the current year, Rowland Company’s accounting clerk prepared the following unadjusted trial balance: Rowland Company UNADJUSTED TRIAL BALANCE August 31, 2018 ACCOUNT TITLE DEBIT CREDIT 1 Cash 7,500.00 2 Accounts Receivable 38,400.00 3 Prepaid Insurance 7,200.00 4 Supplies 1,980.00 5 Land 112,500.00 6 Building 150,250.00 7 Accumulated Depreciation-Building 87,550.00 8 Equipment 135,300.00 9 Accumulated Depreciation-Equipment 97,950.00 10 Accounts Payable 12,150.00 11 Unearned Rent 6,750.00 12 Common Stock 75,000.00 13 Retained Earnings 146,000.00 14 Dividends 15,000.00 15 Fees Earned 324,600.00 16 Salaries and Wages Expense 193,370.00 17 Utilities Expense 42,375.00 18 Advertising Expense 22,800.00 19 Repairs Expense 17,250.00 20 Miscellaneous Expense 6,075.00 21 Totals 750,000.00 750,000.00 The data needed to determine year-end adjustments are as follows: a. Unexpired insurance at August 31, $6,000. b. Supplies on hand at August 31, $480. c. Depreciation of building for the year, $7,500. d. Depreciation of equipment for the year, $4,150. e. Rent unearned at August 31, $1,550. f. Accrued salaries and wages at August 31, $3,200. g. Fees earned but unbilled on August 31, $11,330. Required: 1. Journalize the adjusting entries using the following additional accounts: Salaries and Wages Payable; Rent Revenue; Insurance Expense; Depreciation Expense—Building; Depreciation Expense—Equipment; and Supplies Expense. Refer to the Chart of Accounts for exact wording of account titles. 2. Determine the balances of the accounts affected by the adjusting entries, and prepare an adjusted trial balance.
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.
| ACCOUNT TITLE | DEBIT | CREDIT | |
|---|---|---|---|
|
1
|
Cash
|
7,500.00
|
|
|
2
|
|
38,400.00
|
|
|
3
|
Prepaid Insurance
|
7,200.00
|
|
|
4
|
Supplies
|
1,980.00
|
|
|
5
|
Land
|
112,500.00
|
|
|
6
|
Building
|
150,250.00
|
|
|
7
|
|
|
87,550.00
|
|
8
|
Equipment
|
135,300.00
|
|
|
9
|
Accumulated Depreciation-Equipment
|
|
97,950.00
|
|
10
|
Accounts Payable
|
|
12,150.00
|
|
11
|
Unearned Rent
|
|
6,750.00
|
|
12
|
Common Stock
|
|
75,000.00
|
|
13
|
|
|
146,000.00
|
|
14
|
Dividends
|
15,000.00
|
|
|
15
|
Fees Earned
|
|
324,600.00
|
|
16
|
Salaries and Wages Expense
|
193,370.00
|
|
|
17
|
Utilities Expense
|
42,375.00
|
|
|
18
|
Advertising Expense
|
22,800.00
|
|
|
19
|
Repairs Expense
|
17,250.00
|
|
|
20
|
Miscellaneous Expense
|
6,075.00
|
|
|
21
|
Totals
|
750,000.00
|
750,000.00
|
| a. | Unexpired insurance at August 31, $6,000. |
| b. | Supplies on hand at August 31, $480. |
| c. | Depreciation of building for the year, $7,500. |
| d. | Depreciation of equipment for the year, $4,150. |
| e. | Rent unearned at August 31, $1,550. |
| f. | Accrued salaries and wages at August 31, $3,200. |
| g. | Fees earned but unbilled on August 31, $11,330. |
| Required: | |
| 1. | Journalize the |
| 2. | Determine the balances of the accounts affected by the adjusting entries, and prepare an adjusted trial balance. |
| CHART OF ACCOUNTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Rowland Company | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| General Ledger | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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