You have been provided with the following Trial Balance for Jojo & Lulu Ltd. Jojo & Lulu Ltd Trial balance as at 31st March 2020 Dr Cr K K Bank 1,200.00 Share capital 30,000.00 Cash 400.00 Long term loan 15,000.00 Insurance 2,000.00 Office expenses 15,000.00 Fixtures and Fittings 30,000.00 Accumulated depreciation - Fixtures and Fittings on 1 April 2019 10,000.00 Provision for bad and doubtful debts as at 1 April 2019 5,000.00 Purchases 60,000.00 Salaries 25,000.00 Sales 93,600.00 Stock at 1 April 2019 15,000.00 Accounts Payable 13,000.00 Accounts Receivable 18,000.00 166,600.00 166,600.00 Additional Information Closing Stocks on 31st March 2020 was K8,000 Included in Insurance expenses was K500 relating to the month of April 2020. The company policy for depreciation of fixtures and fittings is 10% on cost A debt of K3,000 included in the Accounts Receivable balance of K18,000 is unrecoverable 5 At 31st March 2020, K250 was owning in respect of Water expenses. 6 The Provision for bad and doubtful debts is to be increased by K900. Required: Prepare a statement of Comprehensive Income for Jojo & Lulu Ltd for the year ended 31st March 2020. Prepare a statement of Financial Position for Jojo & Lulu Ltd as at 31st March 2020.
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.
QUESTION ONE
You have been provided with the following
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Jojo & Lulu Ltd |
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|
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Trial balance as at 31st March 2020 |
Dr |
Cr |
|
|
K |
K |
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Bank |
1,200.00 |
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|
Share capital |
|
30,000.00 |
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Cash |
400.00 |
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Long term loan |
|
15,000.00 |
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Insurance |
2,000.00 |
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|
Office expenses |
15,000.00 |
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Fixtures and Fittings |
30,000.00 |
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|
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|
10,000.00 |
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Provision for bad and doubtful debts as at 1 April 2019 |
|
5,000.00 |
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Purchases |
60,000.00 |
|
|
Salaries |
25,000.00 |
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Sales |
|
93,600.00 |
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Stock at 1 April 2019 |
15,000.00 |
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Accounts Payable |
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13,000.00 |
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18,000.00 |
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|
|
166,600.00 |
166,600.00 |
Additional Information
- Closing Stocks on 31st March 2020 was K8,000
- Included in Insurance expenses was K500 relating to the month of April 2020.
- The company policy for depreciation of fixtures and fittings is 10% on cost
- A debt of K3,000 included in the Accounts Receivable balance of K18,000 is unrecoverable 5 At 31st March 2020, K250 was owning in respect of Water expenses.
6 The Provision for bad and doubtful debts is to be increased by K900.
Required:
- Prepare a statement of Comprehensive Income for Jojo & Lulu Ltd for the year ended 31st
March 2020.
- Prepare a statement of Financial Position for Jojo & Lulu Ltd as at 31st March 2020.
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