The trial balance and additional information given below was obtained from the records of Vancouver Traders on 28 February 2020, the end of the financial year. REQUIRED Use the trial balance, adjustments and additional information to prepare the Income statement for the year ended 28 February 2020 Vancouver Traders PREADJUSTMENT TRIALBALANCE ON 28 FEBRUARY 2020 Balane sheet accounts section Debit ydo Drawings 000 00E I 000 % Land and Buildings 000 Z16 Vehicles at Cost 000 Z9 Equip ment at Cost 000 08 Accumulated Depreciation on Vehicles 000 HE Accumulated Depreciation on Equip ment 008 9T 000 E (ed N6) yueg uu ysodap pany Traling inventory 000 EZI Debtors con trol 142 420 Provision for Bad Debts 002 Bank 96 65 Cash Float 133 344 Gelitors Control Motgage Loan Fin Bank (12%) 000 0Z Noninal Accounts Section 1510 320 Cos of sa les 000 Z Saksreturns 009 6 427 200 salem pue saunes Bad debts 00 ET Stafio nery Rates and Taxes Moror expenses 000 96
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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