The following post-closing list of accounts was drawn from the accounts of Little Grocery Supplier (LGS) as of December 31, Year 2: $ 6,460 18,860 1,805 25,530 10,880 21,200 16,965 Cash Accounts receivable Allowance for doubtful accounts Inventory Accounts payable Common stock Retained earnings Transactions for Year 3 1. Acquired an additional $10,100 cash from the issue of common stock. 2. Purchased $59,300 of inventory on account. 3. Sold inventory that cost $63,000 for $93,300. Sales were made on account. 4. The company wrote off $1,110 of uncollectible accounts. 5. On September 1, LGS loaned $11,000 to Eden Co. The note had an 7 percent interest rate and a one-year term. 6. Paid $15,840 cash for operating expenses. 7. The company collected $71,880 cash from accounts receivable. 8. A cash payment of $52,850 was paid on accounts payable. 9. The company paid a $4,200 cash dividend to the stockholders. 10. Uncollectible accounts are estimated to be 2 percent of sales on account. 11. Recorded the accrued interest at December 31, Year 3 (see item 5).
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 information applies to the questions displayed below.]
The following post-closing list of accounts was drawn from the accounts of Little Grocery Supplier (LGS) as of December
31, Year 2:
Cash
$ 6,460
Accounts receivable
18,860
Allowance for doubtful accounts
1,805
25,530
10,880
21,200
16,965
Inventory
Accounts payable
Common stock
Retained earnings
Transactions for Year 3
1. Acquired an additional $10,100 cash from the issue of common stock.
2. Purchased $59,300 of inventory on account.
3. Sold inventory that cost $63,000 for $93,300. Sales were made on account.
4. The company wrote off $1,110 of uncollectible accounts.
5. On September 1, LGS loaned $11,000 to Eden Co. The note had an 7 percent interest rate and a one-year term.
6. Paid $15,840 cash for operating expenses.
7. The company collected $71,880 cash from accounts receivable.
8. A cash payment of $52,850 was paid on accounts payable.
9. The company paid a $4,200 cash dividend to the stockholders.
10. Uncollectible accounts are estimated to be 2 percent of sales on account.
11. Recorded the accrued interest at December 31, Year 3 (see item 5).](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdf9c49b9-ebc3-4254-9011-25d5959a8511%2Fed42d249-b747-4ca5-ab7f-df6820b35526%2Fmh2n74z_processed.png&w=3840&q=75)
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