The BGD Co. had the following data at the end of 2018: Balance Sheet as at December 31 2017 2018 Non-current Assets Cost Depn NBV Cost Depn NBV Goodwill 100,000 50,000 Building 260,000 260,000 260,000 260,000 Equipment 210,000 15,000 195,000 290,000 35,000 255,000 Current Assets Stock 22,000 20,000 Short Term Investment 15,000 30,000 Debtors 22,000 13,000 Bank 10,000 0 Cash 12,000 81,000 9,000 72,000 636,000 637,000 Equity & Liabilities Capital & Reserve Share Capital ($1 Ord Shares) 220,000 200,000 Share Premium 15,000 15,000 General Reserves 37,000 47,000 Retained Earnings 121,000 393,000 257,000 519,000 Non-Current Liabilities 10% Debenture 202,000 47,000 Current Liabilities Creditors 17,000 24,000 Bank overdraft 0 6000 Tax Payable 14,000 20,000 Dividends 10,000 41,000 21,000 71,000 636,000 637,000 Condensed Income Statement Sales 950,000, Gross profit 550,000, profit before tax 325,000, tax (145,000), profit after tax 180,000, dividends (34,000), transfer to reserve (10,000), profit for the year 136,000, retained earnings b/d 121,000, retained earnings c/d 257,000 Notes: During the year equipment costing 40,000 with a book value of 30,000 was sold for 35,000. Please note that PBIT for the year is $329,700 and the tax paid in the current year is $139,000 (you do not need to compute these amounts)
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 BGD Co. had the following data at the end of 2018:
Balance Sheet as at December 31
2017 2018
Non-current Assets Cost Depn NBV Cost Depn NBV
Building 260,000 260,000 260,000 260,000
Equipment 210,000 15,000 195,000 290,000 35,000 255,000
Current Assets
Stock 22,000 20,000
Short Term Investment 15,000 30,000
Debtors 22,000 13,000
Bank 10,000 0
Cash 12,000 81,000 9,000 72,000
636,000 637,000
Equity & Liabilities
Capital & Reserve
Share Capital ($1 Ord Shares) 220,000 200,000
Share Premium 15,000 15,000
General Reserves 37,000 47,000
Non-Current Liabilities
10% Debenture 202,000 47,000
Current Liabilities
Creditors 17,000 24,000
Bank overdraft 0 6000
Tax Payable 14,000 20,000
Dividends 10,000 41,000 21,000 71,000
636,000 637,000
Condensed Income Statement
Sales 950,000, Gross profit 550,000, profit before tax 325,000, tax (145,000), profit after tax 180,000, dividends (34,000), transfer to reserve (10,000), profit for the year 136,000, retained earnings b/d 121,000, retained earnings c/d 257,000
Notes: During the year equipment costing 40,000 with a book value of 30,000 was sold for 35,000. Please note that PBIT for the year is $329,700 and the tax paid in the current year is $139,000 (you do not need to compute these amounts)
Required: Prepare the
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