The adjusted trial balance for Happ Company follows. Adjusted Trial Balance December 31 Number Account Title Debit Credit 101 Cash $ 8,800 106 Accounts receivable 38,456 153 Trucks 42,000 154 Accumulated depreciation—Trucks $ 16,884 183 Land 30,000 201 Accounts payable 20,504 209 Salaries payable 4,690 233 Unearned revenue 4,090 307 Common stock 18,000 318 Retained earnings 51,872 319 Dividends 19,276 401 Plumbing revenue 74,000 611 Depreciation expense—Trucks 5,628 622 Salaries expense 34,632 640 Rent expense 11,248 Totals $ 190,040 $ 190,040 a. Use the adjusted trial balance to prepare the December 31 year-end income statement. b. Use the adjusted trial balance to prepare the December 31 year-end statement of retained earnings. The Retained earnings account balance was $51,872 on December 31 of the prior year. c. Use the adjusted trial balance to prepare the December 31 year-end balance sheet.
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 adjusted
| Adjusted Trial Balance | |||
| December 31 | |||
| Number | Account Title | Debit | Credit |
|---|---|---|---|
| 101 | Cash | $ 8,800 | |
| 106 | 38,456 | ||
| 153 | Trucks | 42,000 | |
| 154 | $ 16,884 | ||
| 183 | Land | 30,000 | |
| 201 | Accounts payable | 20,504 | |
| 209 | Salaries payable | 4,690 | |
| 233 | Unearned revenue | 4,090 | |
| 307 | Common stock | 18,000 | |
| 318 | 51,872 | ||
| 319 | Dividends | 19,276 | |
| 401 | Plumbing revenue | 74,000 | |
| 611 | Depreciation expense—Trucks | 5,628 | |
| 622 | Salaries expense | 34,632 | |
| 640 | Rent expense | 11,248 | |
| Totals | $ 190,040 | $ 190,040 |
a. Use the adjusted trial balance to prepare the December 31 year-end income statement.
b. Use the adjusted trial balance to prepare the December 31 year-end statement of retained earnings. The Retained earnings account balance was $51,872 on December 31 of the prior year.
c. Use the adjusted trial balance to prepare the December 31 year-end balance sheet.
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