Shown below are selected transactions of the architectural firm of Baxter, Claxter, and Stone, Inc.April 5 Prepared building plans for Spangler Construction Company. Sent Spangler an invoicefor $900 requesting payment within 30 days. (The appropriate revenue account isentitled Drafting Fees Earned.)May 17 Declared a cash dividend of $5,000. The dividend will not be paid until June 25.May 29 Received a $2,000 bill from Bob Needham, CPA, for accounting services performedduring May. Payment is due by June 10. (The appropriate expense account is entitledProfessional Expenses.)June 4 Received full payment from Spangler Construction Company for the invoice sent onApril 5.June 10 Paid Bob Needham, CPA, for the bill received on May 29.June 25 Paid the cash dividend declared on May 17.a. Prepare journal entries to record the transactions in the firm’s accounting records.b. Identify any of the above transactions that will not result in a change in the company’s netincome.
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.
Shown below are selected transactions of the architectural firm of Baxter, Claxter, and Stone, Inc.
April 5 Prepared building plans for Spangler Construction Company. Sent Spangler an invoice
for $900 requesting payment within 30 days. (The appropriate revenue account is
entitled Drafting Fees Earned.)
May 17 Declared a cash dividend of $5,000. The dividend will not be paid until June 25.
May 29 Received a $2,000 bill from Bob Needham, CPA, for accounting services performed
during May. Payment is due by June 10. (The appropriate expense account is entitled
Professional Expenses.)
June 4 Received full payment from Spangler Construction Company for the invoice sent on
April 5.
June 10 Paid Bob Needham, CPA, for the bill received on May 29.
June 25 Paid the cash dividend declared on May 17.
a. Prepare
b. Identify any of the above transactions that will not result in a change in the company’s net
income.
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