The following adjusted trial balance was taken from the work sheet of Babylon Lighting. Assume the owner, Jillian Johnson, made no additional investments during the year. Babylon Lighting Adjusted Trial Balance December 31, 20-- Account Title Debit Credit Cash 29,900 Accounts Receivable 55,200 Merchandise Inventory 42,600 Store Supplies 1,180 Office Supplies 400 Prepaid Insurance 1,200 Store Equipment 37,000 Accumulated Depreciation—Store Equipment 5,000 Office Equipment 15,000 Accumulated Depreciation—Office Equipment 3,600 Accounts Payable 27,300 Salaries Payable 1,340 Mortgage Payable (Current portion: $1,200) 29,600 Jillian Johnson, Capital 104,480 Jillian Johnson, Drawing 8,600 Income Summary 46,600 42,600 Sales 106,600 Sales Discounts 1,600 Purchases 61,800 Purchases Returns and Allowances 3,000 Purchases Discounts 2,400 Sales Salary Expense 13,600 Office Salary Expense 7,600 Advertising Expense 800 Store Supplies Expense 600 Office Supplies Expense 480 Insurance Expense 260 Depreciation Expense—Store Equipment 1,000 Depreciation Expense—Office Equipment 500 325,920 325,920 Required: Prepare a classified balance sheet for Babylon Lighting as of December 31, 20--
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 following adjusted
| Babylon Lighting Adjusted Trial Balance December 31, 20-- |
||||
| Account Title | Debit | Credit | ||
| Cash | 29,900 | |||
| 55,200 | ||||
| Merchandise Inventory | 42,600 | |||
| Store Supplies | 1,180 | |||
| Office Supplies | 400 | |||
| Prepaid Insurance | 1,200 | |||
| Store Equipment | 37,000 | |||
| 5,000 | ||||
| Office Equipment | 15,000 | |||
| Accumulated Depreciation—Office Equipment | 3,600 | |||
| Accounts Payable | 27,300 | |||
| Salaries Payable | 1,340 | |||
| Mortgage Payable (Current portion: $1,200) | 29,600 | |||
| Jillian Johnson, Capital | 104,480 | |||
| Jillian Johnson, Drawing | 8,600 | |||
| Income Summary | 46,600 | 42,600 | ||
| Sales | 106,600 | |||
| Sales Discounts | 1,600 | |||
| Purchases | 61,800 | |||
| Purchases Returns and Allowances | 3,000 | |||
| Purchases Discounts | 2,400 | |||
| Sales Salary Expense | 13,600 | |||
| Office Salary Expense | 7,600 | |||
| Advertising Expense | 800 | |||
| Store Supplies Expense | 600 | |||
| Office Supplies Expense | 480 | |||
| Insurance Expense | 260 | |||
| Depreciation Expense—Store Equipment | 1,000 | |||
| Depreciation Expense—Office Equipment | 500 | |||
| 325,920 | 325,920 |
Required:
Prepare a classified
| Babylon Lighting | |||
| Balance Sheet | |||
| December 31, 20-- | |||
| Assets | |||
| Current assets: | |||
| $fill in the blank 2 | |||
| fill in the blank 4 | |||
| fill in the blank 6 | |||
| fill in the blank 8 | |||
| fill in the blank 10 | |||
| fill in the blank 12 | |||
| Total current assets | $fill in the blank 13 | ||
| Property, plant, and equipment: | |||
| $fill in the blank 15 | |||
| fill in the blank 17 | $fill in the blank 18 | ||
| $fill in the blank 20 | |||
| fill in the blank 22 | fill in the blank 23 | ||
| Total property, plant, and equipment | fill in the blank 24 | ||
| Total assets | $fill in the blank 25 | ||
| Liabilities | |||
| Current liabilities: | |||
| $fill in the blank 27 | |||
| fill in the blank 29 | |||
| fill in the blank 31 | |||
| Total current liabilities | $fill in the blank 32 | ||
| Long-term liabilities: | |||
| fill in the blank 34 | |||
| Total liabilities | $fill in the blank 35 | ||
| Owner’s Equity | |||
| fill in the blank 37 | |||
| Total liabilities and owner's equity | $fill in the blank 38 |
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
