SM Investments Corporation had the following account balances at December 31, 2019: Cash on hand and in bank P2,500,000 Cash restricted for bonds payable due On June 30, 2020 1,000,000 Time Deposit 3,000,000 Savings deposit set aside for dividends Payable on March 31, 2020 500,000 * The cash in bank included a customer’s check of P50,000 outstanding for 16 months. * Check of P80,000 in payment of accounts payable was dated and recorded on December 31, 2019 but mailed to creditors on January 12, 2020. * Check of P20,000 dated January 31, 2020 in payment of accounts payable was recorded and mailed December 31, 2019. *The reporting period is the calendar year. The cash receipts journal was held open until January 15, 2020 during which time P 100,000 was collected and recorded on December 31, 2019. In the current assets section of SM’s December 31, 2019 balance sheet, the amount reported as cash and cash equivalents is __________
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.
SM Investments Corporation had the following account balances at December 31, 2019:
Cash on hand and in bank P2,500,000
Cash restricted for bonds payable due
On June 30, 2020 1,000,000
Time Deposit 3,000,000
Savings deposit set aside for dividends
Payable on March 31, 2020 500,000
* The cash in bank included a customer’s check of P50,000 outstanding for 16 months.
* Check of P80,000 in payment of accounts payable was dated and recorded on December
31, 2019 but mailed to creditors on January 12, 2020.
* Check of P20,000 dated January 31, 2020 in payment of accounts payable was recorded
and mailed December 31, 2019.
*The reporting period is the calendar year. The cash receipts journal was held open until
January 15, 2020 during which time P 100,000 was collected and recorded on December
31, 2019.
In the current assets section of SM’s December 31, 2019 balance sheet, the amount reported
as cash and cash equivalents is __________
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