The following is the adjusted trial balance data for Emma's Alterations as of December 31, 2019. Emma's Alterations Adjusted Trial Balance Year Ended December 31, 2019 Debit Credit Cash $602,538 Accounts Receivable 51,689 Equipment 199,430 Merchandise Inventory 171,744 Accounts Payable $235,893 Common Stock 502,200 Sales 398,093 Interest Revenue 100,976 Rent Revenue 65,400 Sales Salaries Expense 26,750 Office Supplies Expense 4,903 Sales Discounts 61,347 Interest Expense 3,570 Sales Returns and Allowances 55,532 Cost of Goods Sold 90,800 Rent Expense 10,400 Depreciation Expense-Office Equipment 8,560 Insurance Expense 3,421 Advertising Expense 11,878 Totals $1,302,562 $1,302,562 A. Use the data provided to compute net sales for 2019. B. Compute the gross margin for 2019. C. Compute the gross profit margin ratio (rounded to nearest hundredth).
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 the adjusted
| Emma's Alterations Adjusted Trial Balance Year Ended December 31, 2019 |
||
| Debit | Credit | |
| Cash | $602,538 | |
| 51,689 | ||
| Equipment | 199,430 | |
| Merchandise Inventory | 171,744 | |
| Accounts Payable | $235,893 | |
| Common Stock | 502,200 | |
| Sales | 398,093 | |
| Interest Revenue | 100,976 | |
| Rent Revenue | 65,400 | |
| Sales Salaries Expense | 26,750 | |
| Office Supplies Expense | 4,903 | |
| Sales Discounts | 61,347 | |
| Interest Expense | 3,570 | |
| Sales Returns and Allowances | 55,532 | |
| Cost of Goods Sold | 90,800 | |
| Rent Expense | 10,400 | |
| 8,560 | ||
| Insurance Expense | 3,421 | |
| Advertising Expense | 11,878 | |
| Totals | $1,302,562 | $1,302,562 |
A. Use the data provided to compute net sales for 2019.
B. Compute the gross margin for 2019.
C. Compute the gross profit margin ratio (rounded to nearest hundredth).
D.Prepare a simple income statement for the year ended December 31, 2019.
E.Prepare a multi-step income statement for the year ended December 31, 2019.
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