Chapter 1, Problem 7PSB

Summary Introduction

Introduction: Cash Flow Analysis is a technique used by the company to know the overall worth of the company as well as its subsidiary or branches. Cash flow analysis helps in analyzing the company’s cash outflow and inflow through different activities like financing activities, investing activities, operating activities. This analysis shows how the company generates money or revenue for its working.   

To determine: asset liability and equity table.

Answer to Problem 7PSB

The year ended balance of cash account for $130,060, account receivable account for $675 equipment accounts for $2400 account payable account for 0 common stock account for $1300000 dividend account for $4000 revenue account for $16925 and the expenses account for $9790

Explanation of Solution

	Assets			Liabilities	Equity
Date(June)	Cash	Account Receivable	Office Equipment	Account Payable	Common Stock	Dividends	Revenue	Expenses
1	130,000				130,000
2	-6,000							6,000
4			2400	2400
6	1150							1,150
8	850						850
14		7500					7,500
16	800							800
20	7,500	-7500
21		7900					7,900
24		675					675
25	7,900	-7900
26	-2400			-2400
28	-800							850
29	-4000					4000
30	-150							150
30	-890							890
Balance	130,060	675	2,400	0	130,000	4,000	16,925	9,790

Summary Introduction

Introduction: Cash Flow Analysis is a technique used by the company to know the overall worth of the company as well as its subsidiary or branches. Cash flow analysis helps in analyzing the company’s cash outflow and inflow through different activities like financing activities, investing activities, operating activities. This analysis shows how the company generates money or revenue for its working.   

To prepare: Income statement and statement of retain earning.

Answer to Problem 7PSB

Net income account for $7,135, retain earning account for $3,535 and assets and liabilities account for $133,135.

Explanation of Solution

Income statement for the month of May

N companyIncome statement for the month ended May 31
Particular	Amount $	Amount $
Revenues		16925
Less: Expenses For Rent	6000
Expenses for salaries	1600
Expenses for telephone	150
Expenses for utilities	890
Expenses for advertisement	1150
Net income		$7,135

Statement of retain earning

N companyIncome statement for the month ended May 31
Particular	Amount $	Amount $
Retained earnings as on 1 June		0
Add: Net income	7135
Less: Dividend	4000
Retained earnings as a June 30		$3,135

Balance sheet

N companyBalance sheetFor the month ended may 31
Assets	Liability
Particular	Amount	Particular	Amount
Cash	130060	Accounts payable	0
Office equipment	2400	Common stock	130000
Received account	675	Retained earning	3135
Total assets	133135	Total Liability	133,135

Summary Introduction

Introduction: Cash Flow Analysis is a technique used by the company to know the overall worth of the company as well as its subsidiary or branches. Cash flow analysis helps in analyzing the company’s cash outflow and inflow through different activities like financing activities, investing activities, operating activities. This analysis shows how the company generates money or revenue for its working.   

To construct: Cash flow statement for N company.

Answer to Problem 7PSB

Balance of cash as on June 31^st 130060

Explanation of Solution

Company’s cash flow statement

N companyCash flow statement for June
Particular
Flow of cash from activities	16250
Receipt of cash from customer	6000
Payment if rent in cash	1150
Payment made for cleaning	150
Payment made for telephone expense	890
Payment made for utilities	1600
Net utilization of cash by activities operating		6460
Flow of cash activities
Flow of cash from activities (investing)
Purchase of equipment	2400
Net utilization of cash by activities (investing)		2400
Flow of cash from activities (financing )
Investment made by the owner	130000
Dividend paid in cash	4000
Net cash by activities		126000
Net increment underlying		130060
Balance of cash as on June 1		0
Balance of cash as on June 31st		130060