The following Details are from the books of Terraxa Limited for the year ended May 31 2020 Trial balacne as on May 31 2020 27435 Dividends Paid 4.280 Saks 541,470 Carage Inwards 1,567 Puchases 222003 Oher Operating Expenses 81221 Accounts Recehabie 87600 Maintenance 18.289 Accounts Payable 56,780 Machinery at cost 390,720 Vana at cost 314,460 Machiner: Cummudative Depreciation June 12019 2220 Vans: Cummulative Depreciation June 1 2019 72,000 Inventory at cost June 1 2019 18424 Cash at Bank 374 7% Noles Payable 2030-2032 173.000 Notes payable interest Paid 6.055 Bad Debes 15.598 Alowance foe Doubtful debts June 1 2019 Common Sods e 1 Each Retained Eamings at june1 2019 2641 55,000 194,925 1.188.026 1.188.025 Additional information 1. The Company's Inventory on May 31 2020 was valued at Sh. 19404 2. Depreciation is to be charged as follows: Machinery at 30% pa reducing balance and Vans 20% a straight line 3. The amount shown on maintenance includes Sh. 8580 which represents an annual maintenance contract to 31 March 2021 4. Gas charges incurred for which Invoices have not yet been received amount to. Sh.5335 5. Allowance for doubtful debts is to be set at 4% of accounts receivable 6. The Notes s Payable interest is paid in two annual instalments and the second installment needs to be provided for. 7. The Corporation Tax charge on profits for the year is estimated to be Sh. 3000 Required Prepare Income Statement for the year ended May 31 2020 and a statement of Financial Position at on
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.
question: prepare the income statement and statement of financial position as of may 31st 2020
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