The following data were obtained from the books of Will Champlin for the year 2001 : Cashbook a. Rental Income 12,000 Bal b/d 27,500 Commission 15,000 Payment to Creditors 18,500 Investment Income 18,000 Wages 10,000 Cash Sales 35,000 Loan 12,000 Sale of Machinery 36,000 Rates 7,500 Receipts from debtors 50,000 Equipment 25,000 Purchases 12,500 Loan interest 5,000 Operating Expenses 7,500 Machinery 25,000 Bal c/d 15,500 ---------- ---------- 166,000 166,000 ======= ====== Additional data provided Jan 2001 Dec 2001 ------------------------------------------------------------------------------------------------- Commission Owing 1,500 2,500 Investment Income Prepaid 2,500 1,600 Stock 6,000 8,200 Creditors 3,500 5,000 Equipment Net Book Value 50,000 70,000 Motor Vehicle at Book Value. 40,000 36,000 Debtors 5,000 6,500 Machinery at Book Value 80,000 75,000 Operating Expenses Owing 4,000 6,500 Rates Owing 2,500 2,800 10% Loan 82,000 70,000 The machinery that was sold had a book value of $30,000 The amount for owner’s equity at January 1, 2001 was a. $57,500 b. $60,500 c. $88,000 d. $115,000 How much is the amount to be shown as Commission income for the year ? a. $11,000 b. $14,000 c. $16,000 d. $19,000 How much is the loan interest expense for the year ? a. $5000 b. $7,000 c. $12,000 d. $20,200
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 data were obtained from the books of Will Champlin for the year 2001 :
Cashbook
Rental Income 12,000 Bal b/d 27,500
Commission 15,000 Payment to Creditors 18,500
Investment Income 18,000 Wages 10,000
Cash Sales 35,000 Loan 12,000
Sale of Machinery 36,000 Rates 7,500
Receipts from debtors 50,000 Equipment 25,000
Purchases 12,500
Loan interest 5,000
Operating Expenses 7,500
Machinery 25,000
Bal c/d 15,500
---------- ----------
166,000 166,000
======= ======
Additional data provided
Jan 2001 Dec 2001
-------------------------------------------------------------------------------------------------
Commission Owing 1,500 2,500
Investment Income Prepaid 2,500 1,600
Stock 6,000 8,200
Creditors 3,500 5,000
Equipment Net Book Value 50,000 70,000
Motor Vehicle at Book Value. 40,000 36,000
Debtors 5,000 6,500
Machinery at Book Value 80,000 75,000
Operating Expenses Owing 4,000 6,500
Rates Owing 2,500 2,800
10% Loan 82,000 70,000
The machinery that was sold had a book value of $30,000
The amount for owner’s equity at January 1, 2001 was
How much is the amount to be shown as Commission income for the year ?
How much is the loan interest expense for the year ?
The amount for total sales for the period is?
What would be the gain or loss from the sale of the machinery ?
How much is the
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