The 2014 comparative balance sheet and 2014 income statement of Simple Things Industries Ltd, have just been distributed at a meeting of the company’s board of directors. The members of the board of directors were desirous of knowing the reason or reasons why the cash balance different from the net income. The company uses the indirect method to prepare the statement of cash flows and it is expected that this should be able to provide the needed clarity required by the directors. The directors have asked each student from your accounting course to assist with the needed clarification and have put forward the following financial information grouped according to your surname initial Requirements Reconstruct the company’s comparative balance sheet for 2013/2014 using the information in line with your surname initial and compute and show the missing figures to include the appropriate sign as a positive or negative figure. Which category of the statement of cash flow is considered as the most important? Why? Prepare a complete statement of cash flows for 2014 using the indirect method using the information in line with your surname initial.
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.
The 2014 comparative
The directors have asked each student from your accounting course to assist with the needed clarification and have put forward the following financial information grouped according to your surname initial
Requirements
- Reconstruct the company’s comparative balance sheet for 2013/2014 using the information in line with your surname initial and compute and show the missing figures to include the appropriate sign as a positive or negative figure.
- Which category of the statement of cash flow is considered as the most important? Why?
- Prepare a complete statement of cash flows for 2014 using the indirect method using the information in line with your surname initial.
I need some assistance in answering these questions.
![ACCTI002 Assignment 3B [Compatibility Mode] - Word
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Financial info to be used by surnames with initials (K, Q, M, F)
Simple Things Industries Ltd.
Comparative Balance Sheet
December 31, 2014 and 2013
2014
2013
Increase/(Decrease)
Assets
Cash
190,000
30,000
Accounts Receivable
220,000
230,000
Supplies
Prepaid expenses
Intangible assets
Equipment, net
340,000
310,000
10,000
30,000
90,000
90,000
900.000
790,000
Total Assets
1,750,000
1,480,000
Liabilities
Accounts payable
140,000
90,000
160,000
140,000
Accrued liabilities
190,000
Income tax payable
120,000
Long-term notes payable
Stockholders' Equity
450,000
500,000
Common Stock
310,000
200,000
Retained earnings
Treasury stock
640,000
400,000
(90,000)
(20,000)
Total liabilities and stockholders' equity
1,750,000
1,480,000
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Simple Things Industries Ltd
Income Statement
Year Ended December 31,2014
Revenues and gains:
Sales revenue
1,900,000
Gain on sale of Equipment
Total revenues and gains
60,000
1,960,000
Expenses
Cost of goods sold
Depreciation expense
Other operating expense
850,000
190,000
360,000
Total expenses
1,400,000
560,000
180,000
Income before income taxes
Income tax expense
Net Income
380,000
Notes
Acquisition of Equipment during 2014
Sale proceed from sale of Equipment
Receipt for issuance of notes payable
Payment for note payable
Dividend paid
Book value of equipment sold
450,000
210,000
50,000
100,000
140,000
150,000
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