Case1. The trial balance of Jane Company shown below does not balance. JANE COMPANY Trial Balance June 30, 20X8 Debit Credit Cash P2,600 Accounts Receivable 7,600 Supplies 600 Equipment 8,300 Accounts Payable P9,766 Jane, Capital 1,952 Jane, Drawing 1,500 Service Revenue 15,200 Wages Expense 3,800 Repairs Expense 1,600 Total P26,000 P26,918 The following errors were revealed upon examination of the ledger and journal: Each of the above listed accounts has a normal balance per the general Cash of P360 received from a customer on account was debited to Cash P630 and credited to Accounts Receivable A withdrawal of P300 by the owner was posted as a credit to Jane, Drawing, P300 and credited to Cash P300. A debit of P300 was not posted to Wages The purchase of equipment on account for P700 was recorded as a debit to Repair Expense and a credit to Accounts Payable for P700 Services were performed on account for a customer, P510, for which Accounts Receivable was debited P510 and Service Revenue was credited A payment on account for P225 was credited to Cash for P225 and credited to Accounts Payable for P252. Prepare a correct trial balance for Jane Company
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.
Case1. The
|
JANE COMPANY Trial Balance June 30, 20X8 |
||
|
|
Debit |
Credit |
|
Cash |
P2,600 |
|
|
|
7,600 |
|
|
Supplies |
600 |
|
|
Equipment |
8,300 |
|
|
Accounts Payable |
|
P9,766 |
|
Jane, Capital |
|
1,952 |
|
Jane, Drawing |
1,500 |
|
|
Service Revenue |
|
15,200 |
|
Wages Expense |
3,800 |
|
|
Repairs Expense |
1,600 |
|
|
Total |
P26,000 |
P26,918 |
The following errors were revealed upon examination of the ledger and journal:
- Each of the above listed accounts has a normal balance per the general
- Cash of P360 received from a customer on account was debited to Cash P630 and credited to Accounts Receivable
- A withdrawal of P300 by the owner was posted as a credit to Jane, Drawing, P300 and credited to Cash P300.
- A debit of P300 was not posted to Wages
- The purchase of equipment on account for P700 was recorded as a debit to Repair Expense and a credit to Accounts Payable for P700
- Services were performed on account for a customer, P510, for which Accounts Receivable was debited P510 and Service Revenue was credited
- A payment on account for P225 was credited to Cash for P225 and credited to Accounts Payable for P252.
Prepare a correct trial balance for Jane Company
Case2. Lucky Me Company
The following are the account balances of Sweet Corn for the month ended June 30, 2X18.
|
Revenues |
P85,000 |
|
Expenses |
|
|
Noodles |
22,800 |
|
Seasonings |
17,300 |
|
Employees’ wages and benefits |
10,700 |
|
Lease payments |
24,000 |
|
Utilities |
3,200 |
|
Advertising |
900 |
|
Miscellaneous |
300 |
|
Cash |
6,200 |
|
Equipment |
12,500 |
|
Accounts Payable |
650 |
|
Wages Payable |
1,200 |
|
Investment by Owner |
12,500 |
|
Drawings by Owner |
1,450 |
Requirement: Prepare a
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