You are presented with the following information: Concord Lid. Trading and profit and loss account for the year ended 31 December 2009 C000 C00 Sales Less: Costof goods askd: Opening Stock Purchases 1.000 200 700 900 300 Loss: Closing Stock 600 400 (240) Gross profit Operating expenses Operating profit Debenture interest Net profit before taxafon Taxation Net profit ater taxation Dividends Retained protit for the year 160 (10) 150 (50) 100 (60) 40 Cencerd Ld. Balance sheet asat31 December 2008 C000 2009 C000 1,050 C000 F000 Fixed assets at cost Less: Accumulated Depreciation 900 150 750 255 795 Current assets: Stocks Trade debtors 300 150 45 495 200 120 Cash 20 340 Less Currentliatilitien. Trade creditors Taxation Proposed dividend 70 40 30 140 50 200 950 206 1.090 200 Capital and reserves: Ordinary shares of £1 each Profit and loss accounts 750 200 950 750 240 990 Loans Debenture stock (10% issued on 1 Jan 2000) 100 1.090 950 Required: Prepare a cash flow statement (in accordance with IAS 7) by using Microsoft Excel for the year ended 31 December 2009. Part (b) Cash flow statement is one components of financial statements, and it provides information to aid users of financial statements for decision making. Explain usefulness of cash flow statement. 8888
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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