The following are the selected transactions which were performed by a trading organization during 2019. The accounting period of the organization ends on December 31 each year. On May 1, 2019, a machine was sold for Rs. 150,000 which was purchased for Rs. 700,000 on April 1, 2014 and at the time of purchase the useful life of the machine was estimated to be 6 years and estimated salvage value was Rs. 70,000. Sum of the years’ digits method was decided to be used for calculating depreciation. On July 1, 2019 an old equipment was exchanged with a new equipment. The old equipment was purchased on Oct. 1, 2015 for cash Rs. 250,000 and at the time of purchase the useful life was estimated to be 10 years and estimated salvage value was Rs. 50,000 and straight line method was decided to be used for calculating depreciation. The cost of new equipmet and trade in allowance were Rs. 400,000 and Rs. 80,000 respectively. Required: Record the abovce transactions in General Journal.
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.
1. The following are the selected transactions which were performed by a trading organization
during 2019. The accounting period of the organization ends on December 31 each year.
On May 1, 2019, a machine was sold for Rs. 150,000 which was purchased for Rs. 700,000 on
April 1, 2014 and at the time of purchase the useful life of the machine was estimated to be 6
years and estimated salvage value was Rs. 70,000. Sum of the years’ digits method was decided
to be used for calculating
On July 1, 2019 an old equipment was exchanged with a new equipment. The old equipment was
purchased on Oct. 1, 2015 for cash Rs. 250,000 and at the time of purchase the useful life was
estimated to be 10 years and estimated salvage value was Rs. 50,000 and
was decided to be used for calculating depreciation. The cost of new equipmet and trade in
allowance were Rs. 400,000 and Rs. 80,000 respectively.
Required:
Record the abovce transactions in General Journal.
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