The following selected accounts and the current balances apper in the ledger of Acct 201 Co., for the fiscal year ended May 31, 2020. To answer the questions below, it will be helpful to use a scratch piece of paper and prepare a multiple-step income statement (Note: not all of the listed accounts are used on the income statement. Select those that should appear on the income statement.) Advertising Expense $550 Cost of Merchandise Sold 7,850 Customer Refunds Payable 40 Delivery Expense 16 Depreciation Expense-Office Equipment 50 Depreciation Expense-Store Equipment 140 Estimated Returns Inventory 22 Insurance Expense 48 Interest Expense 21 K.M., Capital 3,449 K.M., Drawing 50 Miscellaneous Administrative Expense 64 Miscellaneous Selling Expense 38 Office Salaries Expense 650 Office Supplies Expense 28 Rent Expense 94 Salaries Payable 41 Sales 11,343 Sales Salaries Expense 900 Required: Show details of your calculations. Label or identify the amounts used (abbreviations ok if we can understand them). 1. What is the amount of Gross Profit? 2. What is the amount of Total Operating Expenses? 3. What is the amount of Net Income?
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 selected accounts and the current balances apper in the ledger of Acct 201 Co., for the fiscal year ended May 31, 2020.
To answer the questions below, it will be helpful to use a scratch piece of paper and prepare a multiple-step income statement (Note: not all of the listed accounts are used on the income statement. Select those that should appear on the income statement.)
Advertising Expense $550
Cost of Merchandise Sold 7,850
Customer Refunds Payable 40
Delivery Expense 16
Depreciation Expense-Store Equipment 140
Estimated Returns Inventory 22
Insurance Expense 48
Interest Expense 21
K.M., Capital 3,449
K.M., Drawing 50
Miscellaneous Administrative Expense 64
Miscellaneous Selling Expense 38
Office Salaries Expense 650
Office Supplies Expense 28
Rent Expense 94
Salaries Payable 41
Sales 11,343
Sales Salaries Expense 900
Required: Show details of your calculations. Label or identify the amounts used (abbreviations ok if we can understand them).
1. What is the amount of Gross Profit?
2. What is the amount of Total Operating Expenses?
3. What is the amount of Net Income?
4. What is the amount of Total Selling Expenses?
5. What is the amount of Total Administrative Expenses?
6. What is the amount of Income from Operations?
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