Tech Services and Purchasing. The corporate expenses for the year ended December 31, 20Y7, are as follows: Line Item Description Amount Tech Services Department $988,200 Purchasing Department 298,000 Other corporate administrative expenses 553,000 Total expense
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.
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Divisional income statements with support department allocations
Horton Technology has two divisions, Consumer and Commercial, and two corporate support departments, Tech Services and Purchasing. The corporate expenses for the year ended December 31, 20Y7, are as follows:
Line Item Description Amount Tech Services Department $988,200 Purchasing Department 298,000 Other corporate administrative expenses 553,000 Total expense $1,839,200 The other corporate administrative expenses include officers’ salaries and other expenses required by the corporation. The Tech Services Department allocates costs to the divisions based on the number of computers in the department, and the Purchasing Department allocates costs to the divisions based on the number of purchase orders for each department. The services used by the two divisions are as follows:
Line Item Description Tech Services Purchasing Consumer Division 500 computers 5,200 purchase orders Commercial Division 310 9,700 Total 810 computers 14,900 purchase orders The support department allocations of the Tech Services Department and the Purchasing Department are considered controllable by the divisions. Corporate administrative expenses are not considered controllable by the divisions. The revenues, cost of goods sold, and operating expenses for the two divisions are as follows:
Line Item Description Consumer Commercial Revenues $8,397,000 $6,630,700 Cost of goods sold 4,665,000 3,348,200 Operating expenses 1,647,100 1,657,500 Horton TechnologyDivisional Income StatementsFor the Year Ended December 31, 20Y7Prepare the divisional income statements for the two divisions. Do not round your interim calculations.
Line Item DescriptionConsumer
DivisionCommercial
Division$- Select - $- Select - - Select - - Select - $- Select - $- Select - - Select - - Select - Operating income before support department allocations $Operating income before support department allocations $Operating income before support department allocations Support department allocations: $- Select - $- Select - - Select - - Select - Total support department allocations $Total support department allocations $Total support department allocations $- Select - $- Select -
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