2. The following Statement of Financial Position was extracted from the books of Gagah Perkasa Sdn Bhd at 31 December 2018 and 2019. Gagah Perkasa Sdn Bhd Statement of Financial Position as at 31 December 2018 2019 RM RM RM RM Non-current Assets Buildings Fixtures less Depreciation Van less Depreciation 50,000 1,800 3,920 55,720 50,000 2,000 7,400 59,400 Current Assets Inventory Trade accounts receivables Bank Cash 5,600 6,400 900 12,400 8,200 220 200 13,120 68.840 20,800 80.200 TOTAL ASSETS Financed by : Capital account: Balance as at 1 January Add: Net Profit Cash introduced 52,540 21,160 10,000 83,700 (21.600) 37,040 35,200 72,240 Less: Drawings (19.700) 52,540 62,100 Non-current iabilities Loan (repayable in 10 years bime) 10,000 15,000 Current Liabilities Account payable Bank overdraft TOTAL LIABILITIES TOTAL LIABILITIES AND CAPITAL 6,300 3,006 16.300 68.840 94 18.100 80.200 Additional information at 31 December 2019: • Fixtures bought in 2019 cost RM400. • Van bought in 2019 cost RM5,500.
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.
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