Using the tabular analysis of business transactions, prepare, in good form, the income statement and balance sheet of IE Company for the year ended December 31, 2022. The balances of specific accounts for IE Company as of December 31, 2021 are presented below. Cash 12,582 Accounts receivable 155,865 184,378 Merchandise inventory Prepaid asset 30,000 Land 500.500 Building 360,000 Accum. depn. - building - 120,000 Equipment 123.200 Accum. depn. - equipment - 12.320 Accounts payable 148,756 Accrued expenses 48,732 Short-term loan payable 80,000 Long-term loan payable 240,000 Capital stock 500,000 Retained eamings 216,717 The following transactions occurred in 1. IE Company sold merchandise worth P30,000 at 100% margin. The customer paid in cash. 2. IE Company sold, on credit, merchandise worth P60,000 for P105,000. 3. IE Company bought merchandise worth P50,000 paying 25% in cash and the remainder under credit. 4. IE Company recorded salaries expense amounting to P25,000 in 2022. All but 10% remain unpaid as of year-end. 5. The accrued expenses as of end-2021 pertains to unpaid utilities. The entire amount was subsequently paid in 2022. 6. The prepaid asset pertains to a three-year insurance policy covering 2022, 2023 and 2024. P10,000 for the insurance coverage in 2022 was recognized as expense. 7. The entity took out a four-year loan in 2021 payable in equal annual installments of P80,000. The short- term portion recorded as of end-2021 was fully paid in 2022. Corresponding interest payment amounting to P6,000 was also made. (Hint: In preparing the balance sheet, recognize and present separately the portion of the loan maturing within the next 12 months as current.) 8. The building and equipment recorded depreciation of P120,000 and $24,640 during the year. 9. IE Company collected P225,000 of accounts receivable and paid P58,000 of accounts payable. HOW SOLUTION USING TABULAR FORMAT ANALYSIS
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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