The following balances were extracted from the books of Jolo Enterprise as at 31st December, 2005. Particulars Debit Credit GH¢ GH¢ Capital 500 Purchases / Sales 550 1,550 Returns 20 50 Discounts 70 130 Telephone Charges 30 Stationery 20 Investment income 50 Stock – 1st Jan. 05 40 Motor vehicle 2,000 Building 3,000 Equipment 1,500 Provision for depreciation: -Motor vehicle 180 -Building 240 -Equipment 500 Debtors / Creditors 4,000 6,200 Provision for doubtful debts 150 Bad debt 30 Insurance premium 70 Bills Receivable 100 Bills Payable 150 Wages and salaries 300 Commission 150 340 Drawings 300 Rent 280 Rent Income 500 Transportation 200 Custom Duties 20 Bank 400 Cash 500 Investment 2,500 Goodwill 5,000 Bank Loan 14,640 Carriage inwards 350 Carriage outwards 550 Trade Mark 4,000 25,580 25,580 The following additional information is given below: The original value of stock at 31/12/05 was GH¢450 however, the market value of the stock as at that date was GH¢390. Salaries and wages accrued was GH¢50. The fixed assets are depreciated at: Motor vehicle 20% on cost. Building 10% on cost. Equipment 15% on reducing balance method. The provision for bad debts was increase to GH¢200. Insurance prepaid was GH¢45. You are required to prepare: a) The Trading and Profit and loss Account for the year ended 31/12/05. b) Balance as at that date
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 balances were extracted from the books of Jolo Enterprise as at 31st December, 2005.
Particulars Debit Credit
GH¢ GH¢
Capital 500
Purchases / Sales 550 1,550
Returns 20 50
Discounts 70 130
Telephone Charges 30
Stationery 20
Investment income 50
Stock – 1st Jan. 05 40
Motor vehicle 2,000
Building 3,000
Equipment 1,500
Provision for depreciation:
-Motor vehicle 180
-Building 240
-Equipment 500
Debtors / Creditors 4,000 6,200
Provision for doubtful debts 150
Bad debt 30
Insurance premium 70
Bills Receivable 100
Bills Payable 150
Wages and salaries 300
Commission 150 340
Drawings 300
Rent 280
Rent Income 500
Transportation 200
Custom Duties 20
Bank 400
Cash 500
Investment 2,500
Bank Loan 14,640
Carriage inwards 350
Carriage outwards 550
Trade Mark 4,000
25,580 25,580
The following additional information is given below:
- The original value of stock at 31/12/05 was GH¢450 however, the market value of the stock as at that date was GH¢390.
- Salaries and wages accrued was GH¢50.
- The fixed assets are
depreciated at:
- Motor vehicle 20% on cost.
- Building 10% on cost.
- Equipment 15% on
reducing balance method .
- The provision for
bad debts was increase to GH¢200. - Insurance prepaid was GH¢45.
You are required to prepare:
- a) The Trading and
Profit and loss Account for the year ended 31/12/05. - b) Balance as at that date
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