The following information was extracted from the accounting records of Dilata Ltd on 30 June 2020: Dr/(Cr) R Land at cost (note 1) 1 000 000 Factory and office buildings at cost (note 1 and 2) ? Machinery and equipment (note 3) 3 000 000 Motor vehicles
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 information was extracted from the accounting records of Dilata Ltd on
30 June 2020:
Dr/(Cr)
R
Land at cost (note 1) 1 000 000
Factory and office buildings at cost (note 1 and 2) ?
Machinery and equipment (note 3) 3 000 000
Motor vehicles (note 3) 645 715
- Factory and office buildings ?
- Machinery and equipment (30 June 2019) (1 080 000)
- Motor vehicles (30 June 2019) (235 715)
Additional information
1. Dilata Ltd acquired and occupied the land on which both the factory and office buildings
were erected on 1 July 2017 at an amount of R1 000 000. The land was revalued for the
first time on 29 June 2020 by Mr King, an independent sworn appraiser at a fair value of R1 500 000.
The factory building was constructed on the land on 1 August 2017, and
completed and available for use on 1 January 2018. The cost of this factory building amounted to R2 400 000.
2. After expansion of operations, an office building was built. The office building was completed and available for use on 1 December 2019. The following expenses were incurred in building the offices:
R
Labour costs 450 000
Materials 150 000
3. The company withdrew its machinery and equipment from normal production for a period
of 4 months during the current year, from 1 July 2019, and used it in the construction of the office building. No machinery or equipment were purchased or sold during the current financial year.
4. On 1 February 2020, a motor vehicle with an original cost of R205 715 and on which R95 715 depreciation was already written off on 1 July 2019, was traded in for a new vehicle costing R336 000. The motor vehicle was acquired for business purposes, but the transaction has not yet been recorded in the accounting records of Dilata Ltd.
5. Non-current assets are
- Motor vehicles: 20% per annum according to the straight-line method.
- Factory and office buildings: 2% per annum according to the straight-line method.
- Machinery and equipment: 20% per annum according to the
6. Owner-occupied land is accounted for in accordance with the revaluation model and
revaluations are made with sufficient regularity to ensure that the carrying amount does
not differ materially from the fair value at year-end.
Owner-occupied buildings, machinery and equipment and motor vehicles are accounted for in accordance with the cost model.
REQUIRED:
Disclose the information in the
Trending now
This is a popular solution!
Step by step
Solved in 6 steps
