The following Trial Balance of Shri Om, as on 31st March, 2018. You are requested to prepare the Trading and Profit and Loss Account for the year ended 31st March, 2018 and a Balance Sheet as on that date after making the necessary adjustments:- Particulars Dr. () Cr.( Sundry Debtors/Creditors Outstanding liability for Expenses Wages 5,00,000 2,00,000 55,000 1,00,000 Carriage Outwards 1,10,000 Carriage Inwards 50,000 General Expenses 70,000 Cash Discounts 20,000 Bad Debts 10,000 Motor Car 2,40,000 Printing and Stationery 15,000 Furniture and Fittings Advertisement 1,10,000 85,000 Insurance 45.000 Salesman's commission Postage and Telephone 87,500 57,500 Salaries 1,60,000 Rates and Taxes 25,000 Capital Account/Drawings 20,000 14,43,000 Purchases/Sales 15,50,000 19,87,500 Opening Stock Cash at Bank 2,50,000 60,000 10,500 Cash in Hand 36,30,500 36,30,500 The following adjustments are to be made: (a) Closing Stock was valued at 7,25,000. (b) A Provision for Doubtful Debts are to be created to the extent of 5 percent on Sundry Debtors. (c) Depreciate-Furniture and Fittings by 10%, Motor Car by 20%. (d) Shri Om had withdrawn goods worth 25,000 during the year. (e) On 31st March, Goods for 75,000 were sent to a customer on 'Sale or Return' basis at a profit of 50% on cost and recorded as actual sales. () The Salesmen was entitled to a Commission of 5% on total sales Debtors include 25,000 bad debts. (h) Printing and Stationery expenses of '55,000 relating to previous year had not been provided in that year but was paid in this year by debiting outstanding Liabilities. SIR022344 () Purchases include purchases of Furniture worth 50,000.
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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