The following is a trail balance of ACC Limited for the year ended 31 December 2014: R BALANCE SHEET ACCOUNTS Capital 250 000 Drawings 4 400 Land and buildings (at cost) 180 000 Vehicles (at cost) 120 000 Furniture (at cost) 15 000 Bank 5 900 Debtors 40 140 Stock ( 1/01/2014) 4 000 Creditors 50 750 Accumulated Depreciation: Vehicles 26 000 Accumulated Depreciation: Furniture 3 000 NOMINAL ACCOUNTS Sales 252 145 Sales returns 615 Commission Income 670 Rent received 1950 Purchases 170 550 Purchases Returns 550 Bad Debts/credit losses 230 Insurance 2 750 Packing material 800 Salaries 38 500 Water and electricity 3300 Additional information: 1. Inventory on 31 December 2014 : Trading inventory R6 500 Packing Material R175 2. Debtor Jacob is insolvent. His debt of R140 has been written off as irrecoverable 3. Provision must be made for depreciation as follows: a. Vehicles 20% on diminishing balance method/reducing balance. b. Furniture 10% Straight Line method. 4. A Debtor, Mr Fletcher who wed R230 finally managed to pay his debt that was previously written off as irrecoverable in 2010. This was not considered in the above trail balance. REQUIRED: Prepare the Statement of Comprehensive Income for ACC Limited for the year ended 31 December 2014.
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 is a trail balance of ACC Limited for the year ended 31 December 2014:
R
Capital 250 000
Drawings 4 400
Land and buildings (at cost) 180 000
Vehicles (at cost) 120 000
Furniture (at cost) 15 000
Bank 5 900
Debtors 40 140
Stock ( 1/01/2014) 4 000
Creditors 50 750
Accumulated Depreciation: Furniture 3 000
NOMINAL ACCOUNTS
Sales 252 145
Sales returns 615
Commission Income 670
Rent received 1950
Purchases 170 550
Purchases Returns 550
Insurance 2 750
Packing material 800
Salaries 38 500
Water and electricity 3300
Additional information:
1. Inventory on 31 December 2014 : Trading inventory R6 500
Packing Material R175
2. Debtor Jacob is insolvent. His debt of R140 has been written off as irrecoverable
3. Provision must be made for depreciation as follows:
a. Vehicles 20% on diminishing balance method/reducing balance.
b. Furniture 10%
4. A Debtor, Mr Fletcher who wed R230 finally managed to pay his debt that was previously written
off as irrecoverable in 2010. This was not considered in the above trail balance.
REQUIRED:
Prepare the Statement of Comprehensive Income for ACC Limited for the year ended 31 December
2014.
Step by step
Solved in 2 steps with 2 images
