The 2020 comparative balance sheet and 2020 income statement of JNC Ltd, have just been prepare and presented to the owners by the company’s Accountant. Upon close examination, it was discovered that some figures in the balance sheet were erroneously omitted due to an oversight by the accountant. In addition, the owners were concerned about the movement in the company’s cash and cash equivalent given that the balance sheet does not show or explain the reason or reasons why there was an increase or decrease in this area. "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 owners". The owners have asked you to assist with the needed clarification having put forward the following financial information: Balance Sheet 2020 2019 Increase/Decrease Assets: Cash & Cash Equivalent ? ? ? Accounts Receivable 87550 ? 1550 Inventories 93900 98540 ? Fixed Assets, Net 160400 ? 49900 Total Assets 373,350 316,890 56,460 Liabilities: Accounts Payable ? ? 950 Accrued Liabilities 22850 24940 ? Longterm Notes Payable 82000 140500 (58500) Stockholders' Equity: Common Stock ? 61500 123500 Retained Earnings 54800 ? (9200) Total Liabilites & Stockholders' Equity 373,350 316,890 56460 Income Statement Revenues & Gains: Sales Revenue 369500 Interest Revenue 11800 Total Revenues & Gains 381300 Expenses: Cost of Goods Sold 205500 Depreciation Expense 15500 Other Operating Expense 126000 Interest Expense 24300 Total Expenses 371300 Income before Income Taxes 10000 Income Tax Expense 16300 Net Loss (6300) Notes Acquisition of fixed asset during 2020 65,400 Sale proceed from sale of plant asset - Receipt for issuance of notes payable - Payment for note payable 58,500 Dividend paid 2,900 Book value of equipment sold - Requirement: Find the missing figures in the balance sheet (show working).
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.
Scenario:
The 2020 comparative
The owners have asked you to assist with the needed clarification having put forward the following financial information:
Balance Sheet
| 2020 | 2019 | Increase/Decrease | |
| Assets: | |||
| Cash & Cash Equivalent | ? | ? | ? |
| 87550 | ? | 1550 | |
| Inventories | 93900 | 98540 | ? |
| Fixed Assets, Net | 160400 | ? | 49900 |
| Total Assets | 373,350 | 316,890 | 56,460 |
| Liabilities: | |||
| Accounts Payable | ? | ? | 950 |
| Accrued Liabilities | 22850 | 24940 | ? |
| Longterm Notes Payable | 82000 | 140500 | (58500) |
| Common Stock | ? | 61500 | 123500 |
| 54800 | ? | (9200) | |
| Total Liabilites & Stockholders' Equity | 373,350 | 316,890 | 56460 |
Income Statement
| Revenues & Gains: | ||
| Sales Revenue | 369500 | |
| Interest Revenue | 11800 | |
| Total Revenues & Gains | 381300 | |
| Expenses: | ||
| Cost of Goods Sold | 205500 | |
| 15500 | ||
| Other Operating Expense | 126000 | |
| Interest Expense | 24300 | |
| Total Expenses | 371300 | |
| Income before Income Taxes | 10000 | |
| Income Tax Expense | 16300 | |
| Net Loss | (6300) |
| Notes | |
| Acquisition of fixed asset during 2020 | 65,400 |
| Sale proceed from sale of plant asset | - |
| Receipt for issuance of notes payable | - |
| Payment for note payable | 58,500 |
| Dividend paid | 2,900 |
| Book value of equipment sold | - |
Requirement:
- Find the missing figures in the balance sheet (show working).
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