Chapter 2, Problem P2.42CP

To determine

1)

Journal:

Journal entries record the effect of the financial transactions on impacted accounts and assist in preparation of financial statements.

Accounts are debited to increase balances of assets and expenses and credited increase the balance of incomes and liabilities

To Prepare:

Journal Entries for November and December 2018.

To determine

2)

T- Account

It is a graphical representation of the postings made to the accounts during a reporting period.

It helps in analysis of the transactions impacting the accounts.

To Prepare:

T-Accounts for each of the entries.

To determine

3)

T-Account:

It is a graphical representation of the postings made to the accounts during a reporting period. It helps in analysis of the transactions impacting the accounts.

To indicate:

Posting to T-Accounts

To determine

4)

Trial Balance

A trial Balance is a list of the balances of various Assets, Liabilities, Expense and Revenue Accounts. It helps in evaluating the arithmetical accuracy of financial transactions and postings during a reporting period and serves as the starting point in the preparation of financial statements.

To prepare:

Trial Balance as at 31 December 2018

To determine

5)

Financial Statements of an Entity

Financial Statements are financial records of the entities transactions for a given reporting period and indicate the financial health of an entity. They comprise of:

1. Income Statements,

2. Balance Sheets and,

3. Cash flow statements.

Prepare Income Statement for the year ended 31 December 2018.

To determine

6)

Statement of Owner’s Equity.

A statement of owner’s equity is a representation of all the capital introduced and withdrawn during a particular reporting period. It also represents the closing balance of the capital invested in a business.

To prepare:

Statement of Owner’s Equity for the year ended 31 December, 2018,

To determine

7)

Financial Statements of an Entity

Financial statements are financial records of the entities transactions for a given reporting period and indicate the financial health of an entity. They comprise of:

1. Income Statements,

2. Balance Sheets and,

3. Cash flow statements.

Balance Sheets list the closing balances of assets and liabilities after giving effect to the operations for a reporting period. Assets and liabilities are grouped together based on their nature and life.

To prepare:

Balance Sheet as at 31 December, 2018.

To determine

8)

Debt Equity Ratio

It is a measure of the proportion of how much debt has been used to finance the equity and operations of the business.

The lower the ratio the better. Higher Debt equity ratio represents a highly leveraged business and can also indicate higher interest payments and lower profitability.

The Debt Ratio for the year ended 31 December 2018.