Unadjusted Trial Adjusted Trial Income Balance Sheet & Statement Balance Adjustments Balance Statement of Owner's Equity Account Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Cash 113,718 113,718 113,718 Petty cash 100 100 100 Accounts receivable 39,390 39,390 39,390 Allowance for doubtful accounts 1,940 2,722 4,662 4,662 Prepaid rent 3,000 3,000 Supplies 825 615 210 210 Merchandise inventory 14,400 14,400 14,400 Equipment 9,000 9,000 9,000 Van 27,000 27,000 27,000 Building Accumulated depreciation Land Accounts payable 125,000 125,000 125,000 23,050 5,025 28,075 28,075 25,000 25,000 25,000 Interest payable Sales tax payable 390 390 390 Employee income tax payable 1,000 1,000 1,000 FICA--Social Security tax payable 420 420 840 840 FICA--Medicare tax payable 105 105 210 210 Unemployment tax payable 945 945 945 Warranty payable Notes payable Bonds payable Discount on bonds payable Retained Earnings 938 1,856 918 918 92,762 92,762 92,762 50,000 50,000 50,000 800 800 800 107,918 107,918 107,918 Common stock 50,000 50,000 50,000 Dividends 10,000 10,000 10,000 Sales 92,800 92,800 92,800 Service revenue 120,000 120,000 120,000 Cost of goods sold Salaries expense Payroll tax expense 47,620 47,620 47,620 82,000 82,000 82,000 5,625 945 7,095 7,095 525 Interest expense Credit card expense Advertising expense Office supplies expense Maintenance expense 10,840 10,840 10,840 1,440 1,440 1,440 18,000 18,000 18,000 24 24 24 65 65 65 Utilities expense 5,600 5,600 5,600 Supplies expense Rent expense Bad debts expense 615 615 615 3,000 3,000 3,000 2,722 2,722 2,722 Depreciation expense Warranty expense 5,025 5,025 5,025 1,856 14,688 1,856 1,856 Totals 540,385 540,385 14,688 550,520 550,520 185,902 212,800 364,618 337,720 Net Income 26,898 26,898 Totals 212,800 212,800 364,618 364,618
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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