Supplies 9,000 Equipment 79,000 Accumulated Depreciation $ 10,500 Accounts Payable 16,100 Common Stock, $1 par value 1
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.
On January 1, Year 1, the general ledger of a company includes the following account balances:
| Accounts | Debit | Credit | ||||
| Cash | $ | 44,200 | ||||
| 47,500 | ||||||
| Supplies | 9,000 | |||||
| Equipment | 79,000 | |||||
| $ | 10,500 | |||||
| Accounts Payable | 16,100 | |||||
| Common Stock, $1 par value | 15,000 | |||||
| Additional Paid-in Capital | 95,000 | |||||
| 43,100 | ||||||
| Totals | $ | 179,700 | $ | 179,700 | ||
During January Year 1, the following transactions occur:
| January | 2 | Issue an additional 2,200 shares of $1 par value common stock for $44,000. | ||
| January | 9 | Provide services to customers on account, $18,300. | ||
| January | 10 | Purchase additional supplies on account, $6,400. | ||
| January | 12 | Purchase 1,000 shares of |
||
| January | 15 | Pay cash on accounts payable, $18,000. | ||
| January | 21 | Provide services to customers for cash, $50,600. | ||
| January | 22 | Receive cash on accounts receivable, $18,100. | ||
| January | 29 | Declare a cash dividend of $0.30 per share to all shares outstanding on January 29. The dividend is payable on February 15. (Hint: The company had 15,000 shares outstanding on January 1, Year 1, and dividends are not paid on treasury stock.) | ||
| January | 30 | Resell 900 shares of treasury stock for $24 per share. | ||
| January | 31 | Pay cash for salaries during January, $43,500. |
7. Analyze the following for the company:
a-1. Calculate the return on equity for the month of January
| Choose Numerator | / | Choose Denominator | = | Return on Equity Ratio |
| / | = | Return on Equity | ||
| / | = |
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
