Below are Samarahan Jaya Berhad’s income statement, statement of retained earnings and balance sheet for 2019 and 2020. Samarahan Jaya Berhad Comparative Income Statement For the Years Ended December 31, 2019 and 2020 2020 (RM) 2019 (RM) Sales 5,125,000 3,257.600 Sales returns and allowances 125,000 57,600 Net sales 5,000,000 3,200,000 Cost of goods sold 3,400,000 2,080,000 Gross Profit 1,600,000 1,120,00 Selling expenses 650,000 464,000 Administrative expenses 325,000 224,000 Total operating expenses 975,000 688,000 Income from operations 625,000 432,000 Other income 25,000 19,200 650,000 451,200 Interest expense 105,000 64,000 Income before tax 545,000 387,200 Income tax expense 300,000 176,000 Net income 245,000 211,200 Samarahan Jaya Berhad Comparative Retained Earnings Statement For the Years Ended December 31, 2019 and 2020 2020 (RM) 2019 (RM) Retained earnings, January 1 723,000 581,800 Add net income for the year 245,000 211,200 Total 968,000 793,000 Less dividends: On preferred stock 40,000 40,000 On common stock 45,000 30,000 Total 85,000 70,000 Retained earnings, December 31 883,000 723,000 Samarahan Jaya Berhad Comparative Balance Sheet December 31, 2019 and 2020 2020 (RM) 2019 (RM) Assets Current assets: Cash 175,000 125,000 Marketable securities 150,000 50,000 Accounts receivable (net) 425,000 325,000 Inventories 720,000 480,000 Prepaid expenses 30,000 20,000 Total current assets 1,500,000 1,000,000 Long-term investments 250,000 225,000 Property, plant and equipment (net) 2.093,000 1,948,000 Total assets 3,843,000 3,173,000 Liabilities Current liabilities 750,000 650,000 Long-term liabilities Mortgage note payable 410,000 0 Bond payable 800,000 800,000 Total long-term liabilities 1,210,000 800,000 Total liabilities 1,960,000 1,450,000 Stockholders’ Equity Preferred 8% stock, RM100 par 500,000 500,000 Common stock, RM1 par 500,000 500,000 Retained earnings 883,000 723,000 Total stockholders’ equity 1,883,000 1,723,000 Tot. liabilities and stockholders’ equity 3,843,000 3,173,000 Compute the dollar and percentage changes on the income statements for 2019 and 2020. Round to one decimal place. Comment on the significant changes between the two years disclosed by the above analysis. Prepare balance common size statements for 2019 and 2020.
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.
Below are Samarahan Jaya Berhad’s income statement, statement of
Samarahan Jaya Berhad
Comparative Income Statement
For the Years Ended December 31, 2019 and 2020
|
|
2020 (RM) |
2019 (RM) |
|
Sales |
5,125,000 |
3,257.600 |
|
Sales returns and allowances |
125,000 |
57,600 |
|
Net sales |
5,000,000 |
3,200,000 |
|
Cost of goods sold |
3,400,000 |
2,080,000 |
|
Gross Profit |
1,600,000 |
1,120,00 |
|
Selling expenses |
650,000 |
464,000 |
|
Administrative expenses |
325,000 |
224,000 |
|
Total operating expenses |
975,000 |
688,000 |
|
Income from operations |
625,000 |
432,000 |
|
Other income |
25,000 |
19,200 |
|
|
650,000 |
451,200 |
|
Interest expense |
105,000 |
64,000 |
|
Income before tax |
545,000 |
387,200 |
|
Income tax expense |
300,000 |
176,000 |
|
Net income |
245,000 |
211,200 |
Samarahan Jaya Berhad
Comparative Retained Earnings Statement
For the Years Ended December 31, 2019 and 2020
|
|
2020 (RM) |
2019 (RM) |
|
Retained earnings, January 1 |
723,000 |
581,800 |
|
Add net income for the year |
245,000 |
211,200 |
|
Total |
968,000 |
793,000 |
|
Less dividends: |
|
|
|
On |
40,000 |
40,000 |
|
On common stock |
45,000 |
30,000 |
|
Total |
85,000 |
70,000 |
|
Retained earnings, December 31 |
883,000 |
723,000 |
Samarahan Jaya Berhad
Comparative Balance Sheet
December 31, 2019 and 2020
|
|
2020 (RM) |
2019 (RM) |
|
Assets |
|
|
|
Current assets: |
|
|
|
Cash |
175,000 |
125,000 |
|
Marketable securities |
150,000 |
50,000 |
|
|
425,000 |
325,000 |
|
Inventories |
720,000 |
480,000 |
|
Prepaid expenses |
30,000 |
20,000 |
|
Total current assets |
1,500,000 |
1,000,000 |
|
Long-term investments |
250,000 |
225,000 |
|
Property, plant and equipment (net) |
2.093,000 |
1,948,000 |
|
Total assets |
3,843,000 |
3,173,000 |
|
Liabilities |
|
|
|
Current liabilities |
750,000 |
650,000 |
|
Long-term liabilities |
|
|
|
Mortgage note payable |
410,000 |
0 |
|
Bond payable |
800,000 |
800,000 |
|
Total long-term liabilities |
1,210,000 |
800,000 |
|
Total liabilities |
1,960,000 |
1,450,000 |
|
|
|
|
|
Preferred 8% stock, RM100 par |
500,000 |
500,000 |
|
Common stock, RM1 par |
500,000 |
500,000 |
|
Retained earnings |
883,000 |
723,000 |
|
Total stockholders’ equity |
1,883,000 |
1,723,000 |
|
Tot. liabilities and stockholders’ equity |
3,843,000 |
3,173,000 |
- Compute the dollar and percentage changes on the income statements for 2019 and 2020. Round to one decimal place.
- Comment on the significant changes between the two years disclosed by the above analysis.
- Prepare balance common size statements for 2019 and 2020.
- Comment on the important contribution of each item to total assets.
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