The accountant for Polo's Pet Shop prepared the following list of account balances from the entity's records for the financial year ended June 30, 2021: Sales Revenue $196,000 Cash $25,000 Accounts Receivable 14,500 Cost of Goods Sold 45,000 Equipment 56,000 Polo, Capital-1 July 2020 22,000 Accounts Payable 17,000 Notes Payable 15,000 General & Admin Expense 32,000 Inventory 1,500 Selling Expense 6,000 Accumulated Depreciation 12,000 Mortgage Payable 5,000 Land 66,000 Interest Expense 21,000 What will be Polo's capital at the end of financial year 30 June 2021 if there was no withdrawal from Polo, but he contributed $10,000 more capital to the business? a. $135,000 b. $124,000 c. $132,000 d. $110,000 e. None on these answers are correct
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 accountant for Polo's Pet Shop prepared the following list of account balances from the entity's records for the financial year ended June 30, 2021:
|
Sales Revenue |
$196,000 |
|
Cash |
$25,000 |
|
|
14,500 |
|
Cost of Goods Sold |
45,000 |
|
Equipment |
56,000 |
|
Polo, Capital-1 July 2020 |
22,000 |
|
Accounts Payable |
17,000 |
|
Notes Payable |
15,000 |
|
General & Admin Expense |
32,000 |
|
Inventory |
1,500 |
|
Selling Expense |
6,000 |
|
|
12,000 |
|
Mortgage Payable |
5,000 |
|
Land |
66,000 |
|
Interest Expense |
21,000 |
|
|
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