Topic: Preparing Financial Statements Below are the accounts of Jocelyn Ravara, Accounting Firm as of December 2018. Using the data below, prepare (a) Statement of Financial Position, (b) Statement of Comprehensive Income and (c) Statement in Change in Equity. Account Accounts Payable Accounts Receivables Amount Account Office supplies expense Office supplies Amount Php 63 500 96 000 198 000 28 000 Auditing Revenues Building Cash 1 361 500 Professional Development expense 86 500 Rent expense Salaries Expense Salaries Payable Travel expense Utilities expense Ravara, Withdrawals Note: 1) During the year, Ravara invested additional Php 22 000 in the business. 750 000 52 500 118 500 735 000 Ravara, Capital 1/1/2018 1 308 500 30 500 Land 75 000 41 000 Notes Receivable 60 000 18 000 Office equipment 362 500 165 000 2) Follow the format in preparing financial statements.
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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