Valley Company’s adjusted trial balance on August 31, 2015, its fiscal year-end, follows. Debit Credit Merchandise inventory $ 38,000 Other (noninventory) assets 152,000 Total liabilities $ 43,890 K. Valley, Capital 125,585 K. Valley, Withdrawals 8,000 Sales 259,920 Sales discounts 3,977 Sales returns and allowances 17,155 Cost of goods sold 100,577 Sales salaries expense 35,609 Rent expense—Selling space 12,216 Store supplies expense 3,119 Advertising expense 22,093 Office salaries expense 32,490 Rent expense—Office space 3,119 Office supplies expense 1,040 Totals $ 429,395 $ 429,395 On August 31, 2014, merchandise inventory was $30,666. Supplementary records of merchandising activities for the year ended August 31, 2015, reveal the following itemized costs. Invoice cost of merchandise purchases $ 111,720 Purchase discounts received 2,346 Purchase returns and allowances 5,363 Costs of transportation-in 3,900 Compute the company’s total cost of merchandise purchased for the year. Total cost of merchandise purchased____.
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.
| Valley Company’s adjusted |
| Debit | Credit | ||||||
| Merchandise inventory | $ | 38,000 | |||||
| Other (noninventory) assets | 152,000 | ||||||
| Total liabilities | $ | 43,890 | |||||
| K. Valley, Capital | 125,585 | ||||||
| K. Valley, Withdrawals | 8,000 | ||||||
| Sales | 259,920 | ||||||
| Sales discounts | 3,977 | ||||||
| Sales returns and allowances | 17,155 | ||||||
| Cost of goods sold | 100,577 | ||||||
| Sales salaries expense | 35,609 | ||||||
| Rent expense—Selling space | 12,216 | ||||||
| Store supplies expense | 3,119 | ||||||
| Advertising expense | 22,093 | ||||||
| Office salaries expense | 32,490 | ||||||
| Rent expense—Office space | 3,119 | ||||||
| Office supplies expense | 1,040 | ||||||
| Totals | $ | 429,395 | $ | 429,395 | |||
|
On August 31, 2014, merchandise inventory was $30,666. Supplementary records of merchandising activities for the year ended August 31, 2015, reveal the following itemized costs. |
| Invoice cost of merchandise purchases | $ | 111,720 |
| Purchase discounts received | 2,346 | |
| Purchase returns and allowances | 5,363 | |
| Costs of transportation-in | 3,900 | |
Compute the company’s total cost of merchandise purchased for the year.
Total cost of merchandise purchased____.
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