Chapter 1, Problem 7BPSB

To determine

Concept Introduction:

Financial Statements: Financial statements are reports of the financial condition of a company or entity. In the financial statements, the management presents the financial performance and position of the company at a point in time. Financial statements disclose the financial effects of business transactions. Financial statements include a balance sheet, income statement, statement of cash flows and statement of change in equity.

Balance Sheet: The balance sheet provides details of the firm’s assets, liabilities and owner’s equity for a given date. The balance sheet gives a snapshot of what the company owns and owes as well as the amount invested in equity. The balance sheet follows the below rule

Assets = Liabilities + equity

Income Statement: It is also called the profit & loss statement. Income statement provides a snapshot of revenue, expenses and net income of the organization for a given period.

Statement of Cash Flows: It is a financial statement that shows the movements of cash and bank balance during a period. It describes the amount of cash generated by a company during a period and the use of the cash.

Statement of change in equity: It is a financial statement that shows the movements of equity capital during a period.

1.

To prepare: A table in required format for the given data

Explanation of Solution

The required table for the given data is prepared as below:

	Assets						Liabilities	+	Equity
Date	Cash	+	Account Receivable	+	Equipment	=	Account Payable	+	N. Niko Capital	-	N. Niko withdrawals	+	Revenues	-	Expenses
1	$130,000								$130,000
2	-6,000														-6,000
4					2,400		2,400
6	-1,150														-1,150
8	850												850
14			7,500										7,500
16	-800														-800
20	7,500		-7,500
21			7,900										7,900
24			675										675
25	7,900		-7,900
26	-2,400						-2,400
28	-800														-800
29	-4,000										-4,000
30	-150														-150
30	-890														-890
	130,060	+	675	+	2,400	=	0	+	130,000	-	-4,000	+	16,925	-	-9,790

2.

To determine

To Prepare: The income statement, statement of owner’s equity and the balance sheet from the given data.

Explanation of Solution

The income statement for Niko’s Maintenance Co for June month is as below.

Niko’s Maintenance Co
Income Statement for the month June
	Details		Amount in $
	Revenue
	Income from maintain services		$16,925
	Expenses
	Rent expenses	6,000
	Administrative expenses	1,150
	Salary expenses	1,600
	Telephone bill	150
	Utilities expenses	890	9,790
	Net income		$7,135

The statement of owner’s equity for Niko’s Maintenance Co for the month of June is as below

Niko’s Maintenance Co
Statement of owner’s equity for the month of June
	Details	Amount in $
	Opening equity	0
	Add: Equity introduced in form of cash	130,000
	Add: Net income for the year	7,135
	Less: Cash withdrawals	-4,000
	Closing equity as on June 30	$133,135

The balance sheet as of June 30 is as below.

Niko’s Maintenance Co
Balance Sheet as on June 30
	Details	Amount in $
	Liabilities
	Equity	$133,135
	Account payable	0
	Total	$133,135
	Assets
	Cash	$130,060
	Account receivable	$675
	Equipments	$2,400
	Total	$133,135

3.

To determine

To Prepare: A statement of cash flows for the month of June.

Explanation of Solution

The statement of cash flows for the month of June is prepared as below.

Niko’s Maintenance Co
Statement of Cash flow for the month of June
			Amount in $
	Opening cash balance		0
	Cash flow from operating activities
	Rent paid in cash	-6,000
	Advertising exp paid in cash	-1,150
	Revenue received in cash	850
	Cash received from customer	7,500
	Cash received from customer	7,900
	Salary paid in cash	-1,600
	Telephone bill paid in cash	-150
	Utilities expenses paid in cash	-890	6460
	Cash flow from financing activities
	Cash paid to supplier of equipment		-2,400
	Cash flow from investing activities
	Cash received from Owner	130,000
	Cash withdrawals by owner	-4,000	126,000
	Cash Balance as on June 30		130,060