The following selected information is for Sandhill Company for the year ended January 31, 2021: Freight in $6,500 Purchase discounts $12,000 Freight out 7,500 Purchase returns and allowances 16,500 Insurance expense 12,000 Rent expense 20,500 Interest expense 6,000 Salaries expense 60,800 Merchandise inventory, beginning 61,400 Salaries payable 2,500 Merchandise inventory, ending 42,000 Sales 324,000 O. G. Pogo, capital 105,000 Sales discounts 14,000 O. G. Pogo, drawings 42,000 Sales returns and allowances 20,400 Purchases 213,000 Unearned sales revenue 4,500 prepare closing entries
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 information is for Sandhill Company for the year ended January 31, 2021:
| Freight in | $6,500 | Purchase discounts | $12,000 | |||
| Freight out | 7,500 | Purchase returns and allowances | 16,500 | |||
| Insurance expense | 12,000 | Rent expense | 20,500 | |||
| Interest expense | 6,000 | Salaries expense | 60,800 | |||
| Merchandise inventory, beginning | 61,400 | Salaries payable | 2,500 | |||
| Merchandise inventory, ending | 42,000 | Sales | 324,000 | |||
| O. G. Pogo, capital | 105,000 | Sales discounts | 14,000 | |||
| O. G. Pogo, drawings | 42,000 | Sales returns and allowances | 20,400 | |||
| Purchases | 213,000 | Unearned sales revenue |
4,500 |
prepare closing entries
Step by step
Solved in 2 steps
