The comparative statement of financial position for Moose Jaw Ltd. is as follows: Moose Jaw Ltd. Comparative Statement of Financial Position As at December 31 2021 2020 Cash $20,500 $12,500 Accounts receivable 34,000 25,500 Inventories 20,000 30,000 Prepaid insurance 2,500 2,000 Equipment 102,000 90,000 Accumulated depreciation - equipment (22,500) (12,500) Total assets $156,500 $147,500 Accounts payable $23,000 $20,000 Interest payable 2,000 3,000 Wages payable 4,000 2,000 Income taxes payable 4,000 5,000 Long-term note payable 30,000 34,500 Common shares 65,000 65,000 Retained earnings 28,500 18,000 Total liabilities and equity $156,500 $147,500 More information about Moose Jaw’s operations for 2021: • A machine which the company paid $10,000 for was sold for a gain of $1,000. The equipment’s accumulated depreciation was $7,000. • The company had net income for of $13,500. Required Construct the operating activities section of Moose Jaw Ltd.’s statement of cash flows using the indirect method. Use proper form, just like we did in class.
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 comparative
Moose Jaw Ltd.
Comparative Statement of Financial Position
As at December 31
2021 2020
Cash $20,500 $12,500
Inventories 20,000 30,000
Prepaid insurance 2,500 2,000
Equipment 102,000 90,000
Total assets $156,500 $147,500
Accounts payable $23,000 $20,000
Interest payable 2,000 3,000
Wages payable 4,000 2,000
Income taxes payable 4,000 5,000
Long-term note payable 30,000 34,500
Common shares 65,000 65,000
Total liabilities and equity $156,500 $147,500
More information about Moose Jaw’s operations for 2021:
• A machine which the company paid $10,000 for was sold for a gain of
$1,000. The equipment’s accumulated depreciation was $7,000.
• The company had net income for of $13,500.
Required
Construct the operating activities section of Moose Jaw Ltd.’s statement of
flows
Step by step
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