Problem 3-69B Revenue Recognition and Matching Process Aunt Bea's Catering Service provides catering service for special occasions. During 2022, Aunt Bea performed $128,300 of catering services and collected $118,500 of cash from customers. Salaries earned by Aunt Bea's employees during 2022 were $38,500. Aunt Bea paid employees $35,000 during 2022. Aunt Bea had $1,200 of supplies on hand at the beginning of the year and purchased an additional $8,000 of supplies inventory during the year. Supplies on hand at the end of 2022 were $1,830. Other selling and administrative expenses incurred during 2022 were $5,800. Required: 1. Calculate revenue for 2022. $fill in the blank 44385ef9bfd7010_1 Calculate expenses for 2022. $fill in the blank 44385ef9bfd7010_2 2. Prepare the 2022 statement of earnings. Aunt Bea's Catering Service Statement of Earnings For the Year Ended December 31, 2022 CONCEPTUAL CONNECTION: Describe the accounting principles used to prepare the statement of earnings.
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.
Problem 3-69B
Revenue Recognition and Matching Process
Aunt Bea's Catering Service provides catering service for special occasions. During 2022, Aunt Bea performed $128,300 of catering services and collected $118,500 of cash from customers. Salaries earned by Aunt Bea's employees during 2022 were $38,500. Aunt Bea paid employees $35,000 during 2022. Aunt Bea had $1,200 of supplies on hand at the beginning of the year and purchased an additional $8,000 of supplies inventory during the year. Supplies on hand at the end of 2022 were $1,830. Other selling and administrative expenses incurred during 2022 were $5,800.
Required:
1. Calculate revenue for 2022.
$fill in the blank 44385ef9bfd7010_1
Calculate expenses for 2022.
$fill in the blank 44385ef9bfd7010_2
2. Prepare the 2022 statement of earnings.
| Aunt Bea's Catering Service |
| Statement of Earnings |
| For the Year Ended December 31, 2022 |
CONCEPTUAL CONNECTION: Describe the accounting principles used to prepare the statement of earnings.
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