The general ledger of Pipers Plumbing at January 1, 2021, includes the following account balances: Accounts Debits Credits Cash $ 4,500 Accounts Receivable 9,500 Supplies 3,500 Equipment 36,000 Accumulated Depreciation $ 8,000 Accounts Payable 6,000 Utilities Payable 7,000 Deferred Revenue 0 Common Stock 23,000 Retained Earnings 9,500 Totals $ 53,500 $ 53,500 The following is a summary of the transactions for the year: 1. January 24 Provide plumbing services for cash, $20,000, and on account, $65,000. 2. March 13 Collect on accounts receivable, $53,000. 3. May 6 Issue shares of common stock in exchange for $11,000 cash. 4. June 30 Pay salaries for the current year, $33,000. 5. September 15 Pay utilities of $7,000 from 2020 (prior year). 6. November 24 Receive cash in advance from customers, $10,000. 7. December 30 Pay $3,000 cash dividends to stockholders. The following information is available for the adjusting entries. Depreciation for the year on the machinery is $8,000. Plumbing supplies remaining on hand at the end of the year equal $1,100. Of the $10,000 paid in advance by customers, $7,000 of the work has been completed by the end of the year. Accrued utilities at year-end amounted to $6,000. 1., 3., 6 & 10. Post the transactions, adjusting entries and closing entries to the T-accounts. Be sure to include beginning balances.
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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The general ledger of Pipers Plumbing at January 1, 2021, includes the following account balances:
| Accounts | Debits | Credits | |||||
| Cash | $ | 4,500 | |||||
| 9,500 | |||||||
| Supplies | 3,500 | ||||||
| Equipment | 36,000 | ||||||
| $ | 8,000 | ||||||
| Accounts Payable | 6,000 | ||||||
| Utilities Payable | 7,000 | ||||||
| Deferred Revenue | 0 | ||||||
| Common Stock | 23,000 | ||||||
| 9,500 | |||||||
| Totals | $ | 53,500 | $ | 53,500 | |||
The following is a summary of the transactions for the year:
| 1. | January | 24 | Provide plumbing services for cash, $20,000, and on account, $65,000. | |||
| 2. | March | 13 | Collect on accounts receivable, $53,000. | |||
| 3. | May | 6 | Issue shares of common stock in exchange for $11,000 cash. | |||
| 4. | June | 30 | Pay salaries for the current year, $33,000. | |||
| 5. | September | 15 | Pay utilities of $7,000 from 2020 (prior year). | |||
| 6. | November | 24 | Receive cash in advance from customers, $10,000. | |||
| 7. | December | 30 | Pay $3,000 cash dividends to stockholders. |
The following information is available for the
Depreciation for the year on the machinery is $8,000. Plumbing supplies remaining on hand at the end of the year equal $1,100. Of the $10,000 paid in advance by customers, $7,000 of the work has been completed by the end of the year. Accrued utilities at year-end amounted to $6,000.
1., 3., 6 & 10.
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