Yamaha Plc prepares its financial statements to 31st December each year. As at 31st December 2022, its trial balance was as follows: DebitCredit £000£000Administration expenses250 Ordinary shares of £1 each, fully paid 800Trade and other receivables520 Cash and cash equivalents375 Share premium 85Distribution expenses325 Property650 Plant and machinery550 Depreciation on plant and machinery at 1 January 2022 275Retained earnings at 1 January 2022 410Purchases880 Bank loan (5%) 200Inventory at 1 January 2022180 Trade and other payables 270Revenue 1,760Dividends paid70 3,8003,800 Further information: Inventory as at 31 December 2022 at cost £250,000 The tax charge based on the profits for the year is £75,000. The bank loan interest has not been paid during the year. The property is to be revalued at £700,000. Depreciation of plant and machinery is to be provided for the year at 10% on a straight-line basis. Administration expenses prepaid is £35,000 Required to prepare: The income statement for the year ending 31/12/2022 , The statement of changes in equity for the year ended 31/12/2022 and The balance sheet as at 31/12/2022
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.
Yamaha Plc prepares its financial statements to 31st December each year. As at 31st December 2022, its
DebitCredit £000£000Administration expenses250 Ordinary shares of £1 each, fully paid 800Trade and other receivables520 Cash and cash equivalents375 Share premium 85Distribution expenses325 Property650 Plant and machinery550
Further information:
- Inventory as at 31 December 2022 at cost £250,000
- The tax charge based on the profits for the year is £75,000.
- The bank loan interest has not been paid during the year.
- The property is to be revalued at £700,000.
- Depreciation of plant and machinery is to be provided for the year at 10% on a straight-line basis.
- Administration expenses prepaid is £35,000
Required to prepare:
- The income statement for the year ending 31/12/2022 ,
- The statement of changes in equity for the year ended 31/12/2022 and
- The balance sheet as at 31/12/2022
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