San Antonio Corporation’s current assets and current liabilities section of the statement of financial position as of December 31, 20x1 appear as follows: Current assets Cash Accounts receivable P5,340,000 P2,400,000 Less: Allowance for doubtful accounts 420,000 4,920,000 Inventories 10,260,000 Prepaid expenses 540,000 Total current assets P18,120,000 Current liabilities Accounts payable P3,660,000 Notes payable 4,020,000 Total current liabilities P7,680,000 The following errors in the corporation’s accounting have been discovered: January 20x2 cash disbursements entered as of December 20x1 included payment of accounts payable amounting to P2,340,000, on which a cash discount of 2% was taken. The inventory included P1,620,000 of merchandise received on December 31, but no purchase invoices were received or entered. Of this amount, P720,000 had been received on consignment; the remainder was purchased FOB destination, terms 2/10, n/30. Sales for the first four (4) days in January 20x2 amounting to P1,800,000 were entered in the sales book as of December 31, 20x1. Of these, P1,290,000 were sales on account, and the remainder were cash Cash, not including cash sales, was collected in January 20x2 and entered as of December 31, 20x1, totaled P2,119,440. Off this amount, P1,399,440 was received on account after cash discount of 2% had been deducted; the remainder represented the proceeds of a bank Based on the above and the result of your audit, determine the following amounts as of December 31, 20x1: I NEED 4-5 Adjusted cash balance Adjusted accounts receivable balance Adjusted accounts payable balance Adjusted working capital Net misstatement in the reported profit as a result of the errors
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.
San Antonio Corporation’s current assets and current liabilities section of the
Current assets
|
Cash |
P5,340,000 |
P2,400,000 |
|
Less: Allowance for doubtful accounts |
420,000 |
4,920,000 |
|
Inventories |
|
10,260,000 |
|
Prepaid expenses |
|
540,000 |
|
Total current assets |
|
P18,120,000 |
Current liabilities
Accounts payable P3,660,000
Notes payable 4,020,000
Total current liabilities P7,680,000
The following errors in the corporation’s accounting have been discovered:
- January 20x2 cash disbursements entered as of December 20x1 included payment of accounts payable amounting to P2,340,000, on which a cash discount of 2% was taken.
- The inventory included P1,620,000 of merchandise received on December 31, but no purchase invoices were received or entered. Of this amount, P720,000 had been received on consignment; the remainder was purchased FOB destination, terms 2/10, n/30.
- Sales for the first four (4) days in January 20x2 amounting to P1,800,000 were entered in the sales book as of December 31, 20x1. Of these, P1,290,000 were sales on account, and the remainder were cash
- Cash, not including cash sales, was collected in January 20x2 and entered as of December 31, 20x1, totaled P2,119,440. Off this amount, P1,399,440 was received on account after cash discount of 2% had been deducted; the remainder represented the proceeds of a bank
Based on the above and the result of your audit, determine the following amounts as of December 31, 20x1:
I NEED 4-5
- Adjusted cash balance
- Adjusted accounts receivable balance
- Adjusted accounts payable balance
- Adjusted
working capital - Net misstatement in the reported profit as a result of the errors
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