The Income statement for the year ended December 31, 20X6, for Total Inc. contains the following Information: Total Inc. Income Statement Year Ended December 31, 20X6 sale Cost of goods sold Gross Profit Operating Expenses Profit from Operations Income Tax Expense Profit $50,000 $30,000 $20,000 $15,000 $ 5,000 $ 3,000 $ 2,000 Total Inc. comparative balance sheet at December 31 Cash Accounts Receivable Inventory Equipment Accumulated Depreciation - equipment Total Assets Account Payable Long-term Notes Payable Common shares Retained Earnings Total Liabilities & Shareholders' Equity 20x6 $ 1,200 $ 300 $ 5,000 $12,000 $(4,000) $14,500 20x5 $ 1,000 $ 1,500 $ 3,000 $ 8,000 $(2,000) $11,500 $ 1,000 $ 2,000 $10,000 $ 1,500 $ $14,500 $ 3,500 $ $ 8,000 $11,500 Additional Information: 1. Operating expenses include depreciation expense of $2,500 2 Accounts Payable related to the purchase of Inventory 3. Equipment that cost $2,000 was sold for $1,500 cash 4. New equipment was purchased during the year for $5,000 5. Common shares were sold for $2,000 cash Round answers to fit 2 decimal places in all questions (in % questions a 0.12 is presented as 12%, so a 0.124 is rounded as 12% and 0.127 is rounded as 13%) The average collection period of sales at December 20X6 was:
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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