Carla Vista Co., a ski tuning and repair shop, opened on November 1, 2021. The company carefully kept track of all its cash receipts and cash payments. The following information is available at the end of the ski season, April 30, 2022. Cash Receipts Cash Payments Issuance of common shares $23,600 Payment to purchase repair shop equipment $10,856 Payments to landlord 1,512 Newspaper advertising payment 452 Utility bill payments 1,137 Part-time helper’s wage payments 3,068 Income tax payment 11,800 Cash receipts from ski and snowboard repair services 37,937 Subtotals 61,537 28,825 Cash balance 32,712 Totals $61,537 $61,537 The repair shop equipment was purchased on November 1 and has an estimated useful life of 4 years. Lease payments to the landlord are made at the beginning of each month. The amount of the payments to the landlord shown above includes a one-time security deposit of $216. The part-time helper is owed $488 at April 30, 2022, for unpaid wages. At April 30, 2022, customers owe Carla Vista Co. $641 for services they have received but have not yet paid for. Prepare an accrual-basis income statement for the 6 months ended April 30, 2022. Prepare the April 30, 2022, classified balance sheet. (List Current Assets in order of liquidity.)
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.
Carla Vista Co., a ski tuning and repair shop, opened on November 1, 2021. The company carefully kept track of all its cash receipts and cash payments. The following information is available at the end of the ski season, April 30, 2022.
|
Cash
Receipts |
Cash
Payments |
|||
|---|---|---|---|---|
|
Issuance of common shares
|
$23,600 | |||
|
Payment to purchase repair shop equipment
|
$10,856 | |||
|
Payments to landlord
|
1,512 | |||
|
Newspaper advertising payment
|
452 | |||
|
Utility bill payments
|
1,137 | |||
|
Part-time helper’s wage payments
|
3,068 | |||
|
Income tax payment
|
11,800 | |||
|
Cash receipts from ski and snowboard repair services
|
37,937 | |||
|
Subtotals
|
61,537 | 28,825 | ||
|
Cash balance
|
32,712 | |||
|
Totals
|
$61,537
|
$61,537
|
The repair shop equipment was purchased on November 1 and has an estimated useful life of 4 years. Lease payments to the landlord are made at the beginning of each month. The amount of the payments to the landlord shown above includes a one-time security deposit of $216. The part-time helper is owed $488 at April 30, 2022, for unpaid wages. At April 30, 2022, customers owe Carla Vista Co. $641 for services they have received but have not yet paid for.
Prepare an accrual-basis income statement for the 6 months ended April 30, 2022.
Prepare the April 30, 2022, classified balance sheet. (List Current Assets in order of liquidity.)
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