The ledger of Novak Corp. on July 31, 2017, includes the selected accounts below before adjusting entries have been prepared. Debit Credit Investment in Note Receivable $12,000 Supplies 22,000 Prepaid Rent 4,400 Buildings 210,000 Accumulated Depreciation—Buildings $150,000 Unearned Service Revenue 11,300 An analysis of the company’s accounts shows the following. 1. The investment in the notes receivable earns interest at a rate of 6% per year. 2. Supplies on hand at the end of the month totaled $15,800. 3. The balance in Prepaid Rent represents 4 months of rent costs. 4. Employees were owed $3,200 related to unpaid salaries and wages. 5. Depreciation on buildings is $5,400 per year. 6. During the month, the company satisfied obligations worth $4,650 related to the Unearned Services Revenue. 7. Unpaid maintenance and repairs costs were $2,300. Prepare the adjusting entries at July 31 assuming that adjusting entries are made monthly. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) No. Date Account Titles and Explanation Debit Credit 1. July 31 enter an account title to record the first transaction Enter a debit amount Enter a credit amount enter an account title to record the first transaction Enter a debit amount Enter a credit amount 2. July 31 enter an account title to record the second transaction Enter a debit amount Enter a credit amount enter an account title to record the second transaction Enter a debit amount Enter a credit amount 3. July 31 enter an account title to record the third transaction Enter a debit amount Enter a credit amount enter an account title to record the third transaction Enter a debit amount Enter a credit amount 4. July 31 enter an account title to record the fourth transaction Enter a debit amount Enter a credit amount enter an account title to record the fourth transaction Enter a debit amount Enter a credit amount 5. July 31 enter an account title to record the fifth transaction Enter a debit amount Enter a credit amount enter an account title to record the fifth transaction Enter a debit amount Enter a credit amount 6. July 31 enter an account title to record the sixth transaction Enter a debit amount Enter a credit amount enter an account title to record the sixth transaction Enter a debit amount Enter a credit amount 7. July 31 enter an account title to record the seventh transaction Enter a debit amount Enter a credit amount enter an account title to record the seventh transaction Enter a debit amount Enter a credit amount
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 ledger of Novak Corp. on July 31, 2017, includes the selected accounts below before
| Debit | Credit | |||
|---|---|---|---|---|
|
Investment in Note Receivable
|
$12,000 | |||
|
Supplies
|
22,000 | |||
|
Prepaid Rent
|
4,400 | |||
|
Buildings
|
210,000 | |||
|
|
$150,000 | |||
|
Unearned Service Revenue
|
11,300 |
An analysis of the company’s accounts shows the following.
| 1. | The investment in the notes receivable earns interest at a rate of 6% per year. | |
| 2. | Supplies on hand at the end of the month totaled $15,800. | |
| 3. | The balance in Prepaid Rent represents 4 months of rent costs. | |
| 4. | Employees were owed $3,200 related to unpaid salaries and wages. | |
| 5. | Depreciation on buildings is $5,400 per year. | |
| 6. | During the month, the company satisfied obligations worth $4,650 related to the Unearned Services Revenue. | |
| 7. | Unpaid maintenance and repairs costs were $2,300. |
Prepare the adjusting entries at July 31 assuming that adjusting entries are made monthly. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
|
No.
|
Date
|
Account Titles and Explanation
|
Debit
|
Credit
|
|---|---|---|---|---|
|
1.
|
July 31
|
enter an account title to record the first transaction
|
Enter a debit amount
|
Enter a credit amount
|
|
enter an account title to record the first transaction
|
Enter a debit amount
|
Enter a credit amount
|
||
|
2.
|
July 31
|
enter an account title to record the second transaction
|
Enter a debit amount
|
Enter a credit amount
|
|
enter an account title to record the second transaction
|
Enter a debit amount
|
Enter a credit amount
|
||
|
3.
|
July 31
|
enter an account title to record the third transaction
|
Enter a debit amount
|
Enter a credit amount
|
|
enter an account title to record the third transaction
|
Enter a debit amount
|
Enter a credit amount
|
||
|
4.
|
July 31
|
enter an account title to record the fourth transaction
|
Enter a debit amount
|
Enter a credit amount
|
|
enter an account title to record the fourth transaction
|
Enter a debit amount
|
Enter a credit amount
|
||
|
5.
|
July 31
|
enter an account title to record the fifth transaction
|
Enter a debit amount
|
Enter a credit amount
|
|
enter an account title to record the fifth transaction
|
Enter a debit amount
|
Enter a credit amount
|
||
|
6.
|
July 31
|
enter an account title to record the sixth transaction
|
Enter a debit amount
|
Enter a credit amount
|
|
enter an account title to record the sixth transaction
|
Enter a debit amount
|
Enter a credit amount
|
||
|
7.
|
July 31
|
enter an account title to record the seventh transaction
|
Enter a debit amount
|
Enter a credit amount
|
|
enter an account title to record the seventh transaction
|
Enter a debit amount
|
Enter a credit amount
|
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