The following pre‐adjustment trial balance appeared in the books of Musketeer Traders at the end of their financial year 30 September 2019. Ignore VAT. DR CR Statement of financial position Capital 400 000 Drawings 5 500 Land and buildings 450 000 Motor Vehicles 225 000 Accumulated depreciation: Vehicles 65 000 Financial Asset: Fixed deposit: JP House 107 000 Bank 3 200 Debtors control 48 220 Trading Inventory 24 640 Mortgage loan 210 520 Creditors Control 33 980 Nominal Accounts Section Sales 1 200 000 Sales Returns 18 800 Cost of sales 800 340 Rent income 45 000 Interest income 4 600 Service income 8 700 Rent expense 66 700 Credit Losses 3 500 Wages and Salaries 102 380 Cleaning Materials 6 300 Office consumables 5 400 Interest on mortgage loan 2 500 Electricity 11 250 Rates and services 4 870 Fuel 12 300 Adevertising 50 700 Telephone 25 600 1 971 000 1 971 000 Additional information and adjustments as at 30 September 2019: 1. The stock take revealed the following items on hand: ‐ Trading Inventory – R 11 000 ‐ Office consumables – R 340 2. Depreciation must be provided for on vehicles at 25% per annum according to the straight‐line method. No vehicles were bought or sold during the year. 3. The following adjustments must be made to enforce the accrual concept: ‐ Wages and salaries payable – R 6 000 ‐ Telephone prepaid for October 2019 – R 1 300 ‐ Rent income received in advance – R 3 500 ‐ Accrued interest on fixed deposit – R 5 350 4. Create an allowance for credit losses to the amount of R 870. Required: Prepare the post adjustment trial balance of Musketeer Traders on 30 September 2019.
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 pre‐adjustment
| DR | CR | |
| Capital | 400 000 | |
| Drawings | 5 500 | |
| Land and buildings | 450 000 | |
| Motor Vehicles | 225 000 | |
| 65 000 | ||
| Financial Asset: Fixed deposit: JP House | 107 000 | |
| Bank | 3 200 | |
| Debtors control | 48 220 | |
| Trading Inventory | 24 640 | |
| Mortgage loan | 210 520 | |
| Creditors Control | 33 980 | |
| Nominal Accounts Section | ||
| Sales | 1 200 000 | |
| Sales Returns | 18 800 | |
| Cost of sales | 800 340 | |
| Rent income | 45 000 | |
| Interest income | 4 600 | |
| Service income | 8 700 | |
| Rent expense | 66 700 | |
| Credit Losses | 3 500 | |
| Wages and Salaries | 102 380 | |
| Cleaning Materials | 6 300 | |
| Office consumables | 5 400 | |
| Interest on mortgage loan | 2 500 | |
| Electricity | 11 250 | |
| Rates and services | 4 870 | |
| Fuel | 12 300 | |
| Adevertising | 50 700 | |
| Telephone | 25 600 | |
| 1 971 000 | 1 971 000 | |
Additional information and adjustments as at 30 September 2019:
1. The stock take revealed the following items on hand:
‐ Trading Inventory – R 11 000
‐ Office consumables – R 340
2. Depreciation must be provided for on vehicles at 25% per annum according to the straight‐line method. No vehicles were bought or sold during the year.
3. The following adjustments must be made to enforce the accrual concept:
‐ Wages and salaries payable – R 6 000
‐ Telephone prepaid for October 2019 – R 1 300
‐ Rent income received in advance – R 3 500
‐ Accrued interest on fixed deposit – R 5 350
4. Create an allowance for credit losses to the amount of R 870.
Required:
Prepare the post adjustment trial balance of Musketeer Traders on 30 September 2019.
**Please see attached for answer format**
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