Week 4-Written Work-Fill in the Blanks Directions: Analyze the following transactions below and write the proper account name on the general journal I provided. Please take note that the general journal is under the perpetual inventory system. Y provided Mr. Granger started a merchandising business on November 1, 2021. He named the business "Computer Legends Store". The store is in Naic, Cavite. Transactions that occurred in December were as follows: 1 Mr. Granger invested an additional P10,000 cash for his business. 2 Mr. Granger purchased P5,000 worth of inventories. It was fully paid in cash. 3 Sold merchandise for P5,000, the customer paid in cash. The items sold had a cost of P3,500. Purchased merchandise from a supplier. Mr. Granger paid P720 in cash. 5 Purchased merchandise from a supplier on credit for P2,600, terms 1/10, n/30. 8 Faulty merchandise purchased by the customer on December 3 amounting to P300 were returned. The returned items had a cost of P210. 13 Mr. Granger received a credit memorandum from the supplier amounting to P600. This is for the return of faulty merchandise Mr. Granger purchased on December 5 for P600. 15 Paid freight charges of P200 for merchandise ordered last month (FOB shipping point). 18 Paid for the merchandise purchased on December 5, less the portion that was returned.. 24 Sold merchandise on credit for P7,000. The items had a cost of P4,400. 30 Received cash payment for merchandise sold on December 24.
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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