The text book I am using is Hospitality Industry Financial Accounting (4th edition). I am in chapter 17 -- Statement of Cash Flows now. Problem 3 asks me to prepare a schedule of cash flows from operating activities for 20x4. The scenario is : The Westland Inn had net earnings of $65,000 during 20X5. Included on its income statement for 20X5 were depreciation and amortization expenses of $150,000 and $5,000, respectively. Its current accounts on its comparative balance sheet showed the following: December 31 . 20x4 20x5 Cash $10,000 $12,000 Marketable Securities $25,000 $27,000 Accounts Receivable $45,000 $40,000 Inventory $15,000 $17,000 Prepaid Expense $10,000 $8,000 Accounts Payable $25,000 $30,000 Accrued Payroll $8,000 $10,000 Income Taxes Payable $10,000 $8,000 Current Maturities of Long-Term Debt $15,000 $18,000 Dividends Payable $5,000 $8,000 In addition, sales of equipment, marketable securities, and investments during 20X5 were as follows: 1. Equipment that cost $20,000 with accumulated depreciation of $12,000 was sold for $5,000. 2. Investments that cost $20,000 were sold for $25,000. 3. Marketable securities that cost $10,000 were sold for $8,000. I need to prepare a schedule of cash flows from operating activities for 20x4.
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 text book I am using is Hospitality Industry Financial Accounting (4th edition). I am in chapter 17 -- Statement of
Problem 3 asks me to prepare a schedule of cash flows from operating activities for 20x4.
The scenario is :
The Westland Inn had net earnings of $65,000 during 20X5. Included on its income statement for 20X5 were
December 31 .
20x4 20x5
Cash $10,000 $12,000
Marketable Securities $25,000 $27,000
Inventory $15,000 $17,000
Prepaid Expense $10,000 $8,000
Accounts Payable $25,000 $30,000
Accrued Payroll $8,000 $10,000
Income Taxes Payable $10,000 $8,000
Current Maturities of Long-Term Debt $15,000 $18,000
Dividends Payable $5,000 $8,000
In addition, sales of equipment, marketable securities, and investments during 20X5 were as follows:
1. Equipment that cost $20,000 with
2. Investments that cost $20,000 were sold for $25,000.
3. Marketable securities that cost $10,000 were sold for $8,000.
I need to prepare a schedule of cash flows from operating activities for 20x4.
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