cash flow S17-7 Prepare the operating section of Preston Media Corporation statement using the indirect method. Use the comparative balance sheet provided and the following selected fiscal 2020 income statement information: • Net income, $19,000 Amortization expense, $11,000 PRESTON MEDIA CORPORATION Balance Sheet March 31, 2020 and 2019 Assets 2020 2019 Current assets Cash $ 5,000 $ 3,900 Accounts receivable 9,600 5,100 Company vehicle Less: Accumulated amortization-company vehicle 105,350 84,350 29,350 18,350 Total assets $90,600 $75,000 Liabilities Current liabilities Accounts payable Long-term liabilities Notes payable $8,000 $ 4,500 9,000 12,000 Total liabilities 17,000 16,500 Shareholders' Equity Common shares 27,000 23,000 Retained earnings 46,500 35,500 Total shareholders' equity Total liabilities and shareholders equity 73,600 58,500 $75,000 590,600
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.
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