The following trial balance has been extracted from the ledger of Mr robert a sole trader as at 31 may 2018 Trial balance DR(sh). CR(shs) Property at cost. 900000 Equipment at cost 575000 Provision for depreciation on. 325000 equipment Provision for depreciation on property 125000. 274000 Stock as at 1 june 2017 Purchases. 2596000 Sales 4050000 Discount allowed. 33700 Discount received. 44200 Wages and salaries. 523600. Bad debts. 17200 Loan interest. 15600 Carriage outwar . 53100 Other operating expenses. 388000 Trade debtor . 462000 Trade credits 336000 Provision for bad debts 2800 Cash on han . 1510 Bank overdraft 145000 Drawings. 289300 13%loan . 120000 981010 Capital . 6129010. 6129010 Additonal information a)stock as at 31st may 2018 was valued at sh 259000 b)wages and salaries accrued by sh1400 c) depreciation for the year ended 31 may 2018 has yet to be provided as follows Property 10% using straight line method and equipment 15% using straight line method D) other operating expenses include certain expenses prepaid ksh 5000.other expenses included under this heading are accurate by ksh 2000 E) The provision for bad debts is to be adjusted so that it is 0.5% of debtors as at 31st 2018 F) purchases include goods valued at sh10400 which were withdrawn by mr Robert for his own personal use Required i) Mr robert income statement for the year end 31 may 2018 ii) statement for financial position as at 31st 2018
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
Trial balance
DR(sh). CR(shs)
Property at cost. 900000
Equipment at cost 575000
Provision for
equipment
Provision for depreciation on property
125000. 274000
Stock as at 1 june 2017
Purchases. 2596000
Sales 4050000
Discount allowed. 33700
Discount received. 44200
Wages and salaries. 523600.
Loan interest. 15600
Carriage outwar . 53100
Other operating expenses. 388000
Trade debtor . 462000
Trade credits
336000
Provision for bad debts
2800
Cash on han . 1510
Bank overdraft
145000
Drawings. 289300
13%loan . 120000
981010
Capital . 6129010. 6129010
Additonal information
a)stock as at 31st may 2018 was valued at sh 259000
b)wages and salaries accrued by sh1400
c) depreciation for the year ended 31 may 2018 has yet to be provided as follows
Property 10% using
D) other operating expenses include certain expenses prepaid ksh 5000.other expenses included under this heading are accurate by ksh 2000
E) The provision for bad debts is to be adjusted so that it is 0.5% of debtors as at 31st 2018
F) purchases include goods valued at sh10400 which were withdrawn by mr Robert for his own personal use
Required
i) Mr robert income statement for the year end 31 may 2018
ii) statement for financial position as at 31st 2018
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