TonelLife Music sels musical instruments. The following data relates to Tonel.ifes inventory of guitars. On January 1, 2021, Tonelife had 12 quitars in inventory at a cost of $ 250 each. During January, the following transactions occurrod: Jan. Purchased 15 guitars at $250 each from International Music Centre (IMC) on account terms n/30 4 Sold 2 guitars for cash at $ 370 each. 6 One of the two guitars sold on January 4 was rotumed because it was defective. A full cash refund was paid. The defective guitar was returned to IMC for a credit on account 16 Sold 21 guitars at $ 300 on account, terms 2/10, n/30. 18 Purchased 10 guitars from IMC for $ 250 each on account, terms n/30 25 Paid the full amount owing to IMC 29 Collected the balance owing from the January 16 sale Naviganu Based on the information provided in the page above, prepare the jourmal entries to record Tonelife Musics January transactions essuming the company uses periodic inventory system. For two transactions in the same date, create the sales transaction first and then create the inventory transaction. Select Not Required if a transaction is not required. Jan 1 Purchases 3,750 Accourts Payable 3,750 Jan 4
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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