The balance sheets of Charles & Co Ltd for the years ended 2017, 2018 and 2019 are as follows: Choolwe & Co Ltd Balance sheets at 31 December 2017 2018 2019 $000 $000 $000 Non-current assets Plant and equipment 13,200 16,110 16,410 Current assets Inventory 2,190 2,280 2,490 Trade debtors 2, 040 2,100 2,430 Short-term investments 4,200 1,800 1,290 Cash at bank and in hand 1,920 1,650 2,160 Creditors: amounts falling due within one year Short-term loans (2,340) (2,580) (2,550) Trade creditors (2,760) (2,610) (2,670) Taxation (360) (420) (530) Net current assets 5,460 5,610 5,750 Net current assets 4,890 2,220 2,620 Total assets less current liabilities 18,090 18,330 19,000 Capital and reserves Called-up share capital 4,500 4,500 4,500 Share premium account 9,000 9,000 9,000 Other reserves 3,280 4,060 4,570 Income statement 1,310 770 960 18,090 18,330 19,030 Other data Income before tax 960 1,020 1,590 Tax on annual profit 360 420 530 Tax paid during the year 300 360 420 Annual depreciation 645 780 900 Dividends declared and paid 360 360 360 In 2018, equipment was sold at a loss of $210,000. New plant in 2018 cost $5,100,000 and in 2019 cost $1,200,000. Income transferred to other reserves in 2018 and 2019 amounted to $780 and $510 respectively. REQUIRED; Prepare a statement of cash flows for 2018 and 2019 in accordance with FSR 1 and show how they would be presented under IAS 7. (State the objective of financial statements.
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
Choolwe & Co Ltd
Balance sheets at 31 December
2017 2018 2019
$000 $000 $000
Non-current assets
Plant and equipment 13,200 16,110 16,410
Current assets
Inventory 2,190 2,280 2,490
Trade debtors 2, 040 2,100 2,430
Short-term investments 4,200 1,800 1,290
Cash at bank and in hand 1,920 1,650 2,160
Creditors: amounts falling due within one year
Short-term loans (2,340) (2,580) (2,550)
Trade creditors (2,760) (2,610) (2,670)
Net current assets 5,460 5,610 5,750
Net current assets 4,890 2,220 2,620
Total assets less current liabilities 18,090 18,330 19,000
Capital and reserves
Called-up share capital 4,500 4,500 4,500
Share premium account 9,000 9,000 9,000
Other reserves 3,280 4,060 4,570
Income statement 1,310 770 960
18,090 18,330 19,030
Other data
Income before tax 960 1,020 1,590
Tax on annual profit 360 420 530
Tax paid during the year 300 360 420
Annual
Dividends declared and paid 360 360 360
In 2018, equipment was sold at a loss of $210,000. New plant in 2018 cost $5,100,000 and in 2019 cost $1,200,000. Income transferred to other reserves in 2018 and 2019 amounted to $780 and $510 respectively.
REQUIRED;
Prepare a statement of
(State the objective of financial statements.
Step by step
Solved in 2 steps with 2 images
