Tess' Shop, Inc., a national clothing chain, had sales of P300 millions last year. The business has a steady net profit margin of 8 percent and a dividend payout ratio of 25 percent. The statement of last year is shown below. Statement of Financial Position End of Year (P millions) Assets Liabilities &Equity Cash... „P20 Accountspayable . P70 Accountsreceivable. .25 Accruedexpenses.. .20 Inventory... 75 Otherpayables... ..30 Plant andequipment. . 120 Ordinary shares... 40 Retainedearnings... 80 Total liabilitiesandequity.... - P240 Totalassets... P240 The firm's marketing staff has told the president that in the coming year there will be a large increase in demand for overcoats and wool stacks. A sales increase of 15 percent is forecasted for the company. All statement of financial position items are expected to maintain the same percent-of-sales relationships as last year, except for ordinary shares and retained earnings. No change is scheduled in the number of ordinary shares outstanding, and retained eamings will change as dictated by the profits and dividend policy of the firm. (Remember the net profit margin is 8 percent.) a. Will external financing be required for the company during the comingyear? b. Whatwouldbethe need forexternalfinancing ifthenetprofit margin wentup to9.5 percent and the dividend payout ratio was increased to 50 percent?Explain.
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
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