Use the information given above to complete the following for January 2020:
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 following information was taken from the books of Underwood Traders for December 2019
and January 2020:
Items appearing on the
31 December 2019
Bank Reconciliation Statement of Underwood Traders as at 31st December 2019
Details Amount (R)
Balance per bank statement (favourable) 405 670
Outstanding cheques: No CQ221 6 780
No CQ276 12 450
No CQ298 21 560
No CQ305 13 240
Outstanding deposit: DS205 18 700
Correction of bank error on Deposit DS200‐ amount overstated by Bank 2 500
Balance per Bank account( favourable) 367 840
Cheque counterfoils of Underwood Traders‐ January 2020
Date Cheque Counterfoil no. Amount (R)
3 CQ306 6 540
12 CQ307 2 410
16 CQ308 12 500
17 CQ309 23 560
20 CQ310 1 470
21 CQ311 3 260
22 CQ312 15 320
23 CQ313 27 650
26 CQ314 8 950
29 CQ315 2 250
103 910
20 2020
Deposit slips of Underwood Traders‐ January 2020
Date Deposit Slip no. Amount (R)
5 DS206 8 900
12 DS207 32 400
18 DS208 17 430
20 DS209 9 650
21 DS210 27 890
22 DS211 36 540
132 810
Bank Statement from Capital Bank for Underwood Traders‐ January 2020
Date Description Debit(R) Credit(R) Balance(R)
1 Balance 405 670 Cr
1 CQ276 12 450 393 220 Cr
1 Deposit 18 700 411 920 Cr
3 CQ306 6 540 405 380 Cr
5 Deposit 8 900 414 280 Cr
7 Correction of error on deposit 2 500 411 780 Cr
7 Monthly Service fees 1 760 410 020 Cr
12 CQ307 2 410 407 610 Cr
12 Deposit 32 400 440 010 Cr
15 Debit Order 3 420 436 590 Cr
15 Internet bank fees 320 436 270 Cr
16 CQ308 12 500 423 770 Cr
17 CQ298 21 560 402 210 Cr
18 Deposit 15 430 417 640 Cr
20 CQ310 1 470 416 170 Cr
20 Deposit 2 400 418 570 Cr
21 CQ311 1 260 417 310 Cr
22 Deposit 36 540 453 850 Cr
23 CQ313 27 650 426 200 Cr
23 CQ313 27 650 398 550 Cr
26 Transaction Fees 670 397 880 Cr
20 2020
27 CT402 13 400 384 480 Cr
28 Interest on credit balance 1 450 385 930 Cr
29 CQ315 2 250 383 680 Cr
30 Debit Order‐ Sky Wise 970 382 710 Cr
30 Debit Order‐JB Properties 12 800 369 910 Cr
30 Deposit 24 860 394 770 Cr
Additional information:
1) Cheque no.CQ221 is now stale and must be cancelled.
2) The bank has recorded cheque CQ311 at the incorrect amount.
3) The deposit corresponding with DS208 was credited on the bank statement at the correct
amount of R 15 430.
4) The bank statement reflects a direct deposit (R 24 860) on 30 June, this was from tenant, K.
Moody for his January rent.
5) The debit order of R 3 420, reflected on the bank statement, was in favour of Cellfirst who
is the business’s cellphone provider.
6) The direct deposit on 20 January was a dividend received from XY Capital.
7) Cheque no CT402 was incorrectly debited to the business bank account.
8) The debit order in favour of Sky Wise is in favour of monthly fibre costs.
9) The debit order in favour of JB Properties is for the business rent expense.
10) CQ313 was incorrectly debited twice on the bank statement.
Required:
Use the information given above to complete the following for January 2020:
Open, post to and balance the bank account in the general ledger.
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