Sapling Ltd is an entity that operates a various nurseries and gardening centres around the country. The following is the trial balance of the Sapling Ltd for the year ended 28 February 2022: Account Name Debit Credit Inventory 75 000 Trade receivables 36 000 Revenue 1 600 000 Cost of sales 750 000 Property, plant and equipment 650 000 Telephone expense 12 000 Revaluation surplus 10 000 Salaries and wages 350 000 Trade payables 120 000 Retained earnings - 1 March 2021 28 000 Share capital 100 000 Advertising expenses 25 000 Depreciation 85 000 Loan 98 000 Bank 10 000 Dividends paid 15 000 Finance income 32 000 Total 1 998 000 1 998 000 Additional information: • The outstanding loan is payable over the next three years in the following ratio 30: 20: 50. • Inventory with a cost price of R20 000 (Selling price of R25 000) was returned by a debtor. No entry for the return of the inventory has been recorded. • 10 000 shares were issued on 28 February 2022 at R5 each for cash. This transaction has not yet been accounted for. • It is the policy of the entity to realise revaluation surplus to retained earnings as the asset is used. An asset revaluation took place on 1 March 2021 and the asset that was revalued was depreciated on a straight-line basis by 20% in the current year. 22 2022 Q.2.1 Prepare the statement of financial position of Sapling Ltd for the financial year ended 28 February 2022, in accordance with the requirements of IAS1 and based on the information provided above. Comparative figures are not required.
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.
Sapling Ltd is an entity that operates a various nurseries and gardening centres around the
country.
The following is the
Account Name Debit Credit
Inventory 75 000
Trade receivables 36 000
Revenue 1 600 000
Cost of sales 750 000
Property, plant and equipment 650 000
Telephone expense 12 000
Revaluation surplus 10 000
Salaries and wages 350 000
Trade payables 120 000
Share capital 100 000
Advertising expenses 25 000
Depreciation 85 000
Loan 98 000
Bank 10 000
Dividends paid 15 000
Finance income 32 000
Total 1 998 000 1 998 000
Additional information:
• The outstanding loan is payable over the next three years in the following ratio 30: 20: 50.
• Inventory with a cost price of R20 000 (Selling price of R25 000) was returned by a debtor.
No entry for the return of the inventory has been recorded.
• 10 000 shares were issued on 28 February 2022 at R5 each for cash. This transaction has not
yet been accounted for.
• It is the policy of the entity to realise revaluation surplus to retained earnings as the asset is
used. An asset revaluation took place on 1 March 2021 and the asset that was revalued was
22 2022
Q.2.1 Prepare the statement of financial position of Sapling Ltd for the financial year
ended 28 February 2022, in accordance with the requirements of IAS1 and based
on the information provided above.
Comparative figures are not required.
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