2018 2017 Current Assets: Cash $ 87,700 $ 23,500 Accounts Receivable 15,300 22,000 Merchandise Inventory 62,600 60,400 Current Liabilities: Accounts Payable 28,100 26,100 Accrued Liabilities 10,600 11,300 Payment of cash dividends Purchase of equipment with cash $ 16,200 54,700 48,000 105,000 Depreciation expense Purchase of building with cash $ 16,700 98,000 Issuance of long-term notes payable to borrow cash Issuance of common stock for cash Net income 57,600
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.
Preparing the statement of
The comparative balance sheet of Jackson Education Supply at December 31, 2018, reported the following:
Jackson’s transactions during 2018 included the following:
Requirements
- Prepare the statement of cash flows of Jackson Educational Supply for the year ended December 31, 2018. Use the indirect method to report cash flows from operating activities.
- Evaluate Jackson's cash flows for the year. Mention all three categories of cash flows, and give the reason for your evaluation.
- If Jackson plans similar activity for 2019, what is its expected
free cash flow ?
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