The following is Gamma Hotel's income statement for the year ended September 30, 2020. Gamma Hotel Income Statement For the Year Ended September 30, 2020 Revenues $810,000 Expenses: Administrative Costs $23,000 Marketing $13,000 Variable Wages $299,000 Management Salaries $94.000 Rent $157,000 Utilities $27,000 Total Expenses $613,000 Net Income $197,000 Gamma Hotel is a limited-service hotel with 18 rooms and no food and beverage operations. Management does not intend to spend a lot of time and money on budgeting. The manager has determined the 2021 budgeted income statement should simply reflect the following predicted changes from the 2020 income statement: Revenues will increase by 2.5% Marketing costs will decrease by 5% Management salaries will increase by 5% Variable wages will remain consistent as a percentage of revenue Utilities will increase by 3% Administrative costs and rent will remain the same Do not enter dollar signs or commas in the input boxes. Prepare the budgeted income statement for the year ending September 30, 2021 using the incremental budgeting approach.
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 Gamma Hotel's income statement for the year ended September 30, 2020.
Gamma Hotel
Income Statement
For the Year Ended September 30, 2020
Revenues
$810,000
Expenses:
Administrative Costs
$23,000
Marketing
$13,000
Variable Wages
$299,000
Management Salaries
$94.000
Rent
$157,000
Utilities
$27,000
Total Expenses
$613,000
Net Income
$197,000
Gamma Hotel is a limited-service hotel with 18 rooms and no food and beverage operations. Management does not intend to spend a lot of time and money on budgeting. The manager has determined the 2021
- Revenues will increase by 2.5%
- Marketing costs will decrease by 5%
- Management salaries will increase by 5%
- Variable wages will remain consistent as a percentage of revenue
- Utilities will increase by 3%
- Administrative costs and rent will remain the same
Do not enter dollar signs or commas in the input boxes.
Prepare the budgeted income statement for the year ending September 30, 2021 using the incremental budgeting approach.
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