21. Hellebore plc has produced the following trial balance for the year ended 31 March 2021: £ 000s E 000s Accumulated depreciation, 880 motor vehicles Accumulated depreciation, plant and machinery Bad debt expense Bank loan (repayable in 2025) 646 22 760 Bank and Cash 170 Heating and lighting Interest expense Inventory, at 1 April 2020 Motor vehicles, at cost Plant and machinery, at cost Provision for doubtful debts 307 16 322 2,770 2,680 29 Purchases 1,965 Retained earnings 656 Sales 3,563 Share capital 1,000 1,200 Share premium Trade payables Trade receivables 355 607 570 9,259 Wages and salaries 9,259 Additional information: (1) Inventory at 31 March 2021 was valued at a cost of £464,000. (ïi) Depreciation has not yet been provided for the year. The following depreciation policies are applied, with the assumption of no residual value: 10% straight line 20% reducing balance Plant and machinery Motor vehicles (iii) On 4 April 2021, the company discovered that one of its customers had gone into administration, owing Hellebore plc £32,000. (iv) A general provision of 4% of trade receivables is to be carried forward. Interest is charged on the bank loan at the rate of 5% per annum. (vi) The corporation tax charge for the year has been calculated at £23,000, which will be paid in full after the year end. Prepare a Statement of Profit or Loss and Statement of Financial Position for Hellebore plc, for the year ended 31 March 2021.
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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