Use the information provided below to prepare the Cash Flow Statement of Rolex Limited for the year ended 31 December 2021. INFORMATION The following information was extracted from the records of Rolex Limited for the financial year ended 31 December 2021. ROLEX LIMITED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2021 R Sales 4 140 000 Cost of sales (2 020 000) Gross profit 2 120 000 Selling and administrative expenses (840 000) Operating profit 1 280 000 Interest expense (80 000) Profit before tax 1 200 000 Company tax (320 000) Profit after tax 880 000 STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER: ASSETS 2021 (R) 2020 (R) Non-current assets 3 740 000 2 940 000 Property, plant and equipment 3 440 000 2 940 000 Investments 300 000 0 Current assets 1 080 000 900 000 Inventories 480 000 500 000 Accounts receivable 510 000 320 000 Cash and cash equivalents 90 000 80 000 Total assets 4 820 000 3 840 000 EQUITY AND LIABILITIES Equity 3 120 000 2 600 000 Ordinary share capital 2 000 000 2 000 000 Retained earnings 1 120 000 600 000 Non-current liabilities 800 000 400 000 Long-term loan 800 000 400 000 Current liabilities 900 000 840 000 Accounts payable 480 000 560 000 Company tax payable 160 000 80 000 Dividends payable 260 000 200 000 Total equity and liabilities 4 820 000 3 840 000 Additional information ¦ All purchases of inventories are on credit. ¦ The selling and administrative expenses include depreciation of R320 000. ¦ Property, plant and equipment were purchased during the year but there were no disposals. ¦ The total dividends for the year ended 31 December 2021 amounted to R360 000. ¦ The issued share capital consisted of 100 000 ordinary shares. ¦ The market price of the shares on 31 December 2021 was R35.
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.
Use the information provided below to prepare the
December 2021.
INFORMATION
The following information was extracted from the records of Rolex Limited for the financial year ended 31 December
2021.
ROLEX LIMITED
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2021
R
Sales 4 140 000
Cost of sales (2 020 000)
Gross profit 2 120 000
Selling and administrative expenses (840 000)
Operating profit 1 280 000
Interest expense (80 000)
Profit before tax 1 200 000
Company tax (320 000)
Profit after tax 880 000
ASSETS 2021 (R) 2020 (R)
Non-current assets 3 740 000 2 940 000
Property, plant and equipment 3 440 000 2 940 000
Investments 300 000 0
Current assets 1 080 000 900 000
Inventories 480 000 500 000
Cash and cash equivalents 90 000 80 000
Total assets 4 820 000 3 840 000
EQUITY AND LIABILITIES
Equity 3 120 000 2 600 000
Ordinary share capital 2 000 000 2 000 000
Non-current liabilities 800 000 400 000
Long-term loan 800 000 400 000
Current liabilities 900 000 840 000
Accounts payable 480 000 560 000
Company tax payable 160 000 80 000
Dividends payable 260 000 200 000
Total equity and liabilities 4 820 000 3 840 000
Additional information
¦ All purchases of inventories are on credit.
¦ The selling and administrative expenses include
¦ Property, plant and equipment were purchased during the year but there were no disposals.
¦ The total dividends for the year ended 31 December 2021 amounted to R360 000.
¦ The issued share capital consisted of 100 000 ordinary shares.
¦ The market price of the shares on 31 December 2021 was R35.
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