The following is the Trial Balances extracted from the books of Rosemary Garden Enterprise as at 31 December 2021: Credit (RM) 153,900 Debit (RM) |Capital Drawings Sales 3,500 400,000 Purchases 250,000 Return Inwards and outwards 4,150 65,000 20,000 36,000 450 Inventory as at 1 January 2021 Delivery van at cost Office equipment at cost Accumulated depreciation at 1 January 2021 Delivery van Office equipment 4,500 10,800 Account Receivable 90,000 Account Payable Insurance on machinery 32.000 750 Allowance for doubtful debts as at 1 January 2021 Discount allowed and discount received Stationery General expenses Rental expense Interest on loan 1550 350 800 300 2,200 3,300 5,600 Cash in hand 4,250 Cash at bank 9,000 1,500 Carriage inwards Wages and salaries expenses 10% Long term investment 8% Loan from Tekun 16,100 162,000 70,000 TOTAL 674,000 674,000 Additional information: a) The closing inventory as at 31 December 2021 is RM 30,000. b) The amount of a debtor of RM750 is to be written off. c) One of the debtors who were already declared bankrupt paid RM300 to the business by cheque. The amount of RM300 has been written off as bad debt four years ago. d) The allowance for doubtful debts is to be provided at 2% of the remaining debtors. e) The insurance expense of RM150 on office machinery has been paid for the month of January 2022. f) Accruals for the period were as follows: RM General expenses 250 Rent expense 300 Wages and salaries 1,500 g) The depreciation allocated for the current year were as follows: Delivery van 20% on carrying value, yearly basis Office equipment 15% on cost, yearly basis h) The dividend earned from long-term investment which was invested on 1 May 2021 was not received yet at the end of the current accounting year. i) During the year, the owner took cash RM500 for his personal use.
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.
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