The following represents the Stockholders' Equity accounts of Mag Corp. as of December 31, 2000. Common Stock, $10 par value, 100,000 shares authorized, 55,000 shares issued & outstanding $550,000 Preferred Stock, $100 par value, 20,000 shares authorized, 4,000 shares issued & outstanding $400,000 $15,000 $400,000 $290,000 The company had the following transactions during the period January 1, 2001 to December 31, 2001 Issued 5,000 shares of common shares for $20 per share cash Declared a cash dividend of $2 per share to its preferred shareholders, with a date of record of April 20 Date of Record Pald the preferred cash dividends Paild-in Capital in Excess of par value, preferred Pald-in Capital in Excess of par value, common Retained Earnings March 1, April 5, April 20, May 5, August 1, Nov. 1, Doo. 31 Declared and distributed (on the same day) a 5% stock dividend ou common stock. The market value of the stock was $25 per stuara. Issued 500 shares of Preferred Stock for a land appraised-at $100,000 Company Incurred a hot Income of $80,000 and closed it to Retained Barnings. .... Required: a) Rocord the transactions listed above in the Journal entry format. b) Prepare the Stockholders' Bquity section of the Balance Sheet as of December 31, 2001.
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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