The following items were taken from the accounting records of Talecom, Incorporated. The income statement and balance sheet at December 31, 2009 except for the retained earnings balance which is the balance at 1/1/2009 Accounts Payable $ 52,000 Accounts Receivable $ 7,000 Land 121,000 Advertising Expense 11,000 Cash 108,000 Common Stock 15,000 Rent Expense 20,000 Dividends 1,000 Insurance Expense 5,000 Notes Payable (long‐term) 62,000 Retained Earnings (beg) 52,300 Salaries Expense 22,000 Service Revenue 121,000 Inventory 3,000 Accumulated Depreciation 20,000 Supplies Expense 1,000 Salaries Payable 1,500 Additional Paid In Capital 100,000 Building 100,000 Income tax rate 40% Prepare an income statement, and a classified balance sheet for the company.
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 items were taken from the accounting records of Talecom, Incorporated. The income statement and
Accounts Payable $ 52,000
Land 121,000
Advertising Expense 11,000
Cash 108,000
Common Stock 15,000
Rent Expense 20,000
Dividends 1,000
Insurance Expense 5,000
Notes Payable (long‐term) 62,000
Retained Earnings (beg) 52,300
Salaries Expense 22,000
Service Revenue 121,000
Inventory 3,000
Supplies Expense 1,000
Salaries Payable 1,500
Additional Paid In Capital 100,000
Building 100,000
Income tax rate 40%
Prepare an income statement, and a classified balance sheet for the company.
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