Debit and Credit Procedures A list of accounts for Montgomery Inc. appears below. Required: Complete the table below for these accounts. The information for the first account has been entered as an example. Account Type of Account Normal Balance Increase Decrease Accounts Payable Liability Credit Credit Debit Accounts Receivable SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 1 SelectCreditDebitItem 2 SelectCreditDebitItem 3 SelectCreditDebitItem 4 Accumulated Depreciation SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 5 SelectCreditDebitItem 6 SelectCreditDebitItem 7 SelectCreditDebitItem 8 Cash SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 9 SelectCreditDebitItem 10 SelectCreditDebitItem 11 SelectCreditDebitItem 12 Common Stock SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 13 SelectCreditDebitItem 14 SelectCreditDebitItem 15 SelectCreditDebitItem 16 Depreciation Expense SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 17 SelectCreditDebitItem 18 SelectCreditDebitItem 19 SelectCreditDebitItem 20 Equipment SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 21 SelectCreditDebitItem 22 SelectCreditDebitItem 23 SelectCreditDebitItem 24 Income Taxes Expense SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 25 SelectCreditDebitItem 26 SelectCreditDebitItem 27 SelectCreditDebitItem 28 Interest Expense SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 29 SelectCreditDebitItem 30 SelectCreditDebitItem 31 SelectCreditDebitItem 32 Land SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 33 SelectCreditDebitItem 34 SelectCreditDebitItem 35 SelectCreditDebitItem 36 Notes Payable SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 37 SelectCreditDebitItem 38 SelectCreditDebitItem 39 SelectCreditDebitItem 40 Prepaid Rent SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 41 SelectCreditDebitItem 42 SelectCreditDebitItem 43 SelectCreditDebitItem 44 Retained Earnings SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 45 SelectCreditDebitItem 46 SelectCreditDebitItem 47 SelectCreditDebitItem 48 Salaries Expense SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 49 SelectCreditDebitItem 50 SelectCreditDebitItem 51 SelectCreditDebitItem 52 Service Revenue SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 53 SelectCreditDebitItem 54 SelectCreditDebitItem 55 SelectCreditDebitItem 56 Supplies
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.
Debit and Credit Procedures
A list of accounts for Montgomery Inc. appears below.
Required:
Complete the table below for these accounts. The information for the first account has been entered as an example.
| Account | Type of Account | Normal Balance | Increase | Decrease |
| Accounts Payable | Liability | Credit | Credit | Debit |
| Accounts Receivable | SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 1 | SelectCreditDebitItem 2 | SelectCreditDebitItem 3 | SelectCreditDebitItem 4 |
| SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 5 | SelectCreditDebitItem 6 | SelectCreditDebitItem 7 | SelectCreditDebitItem 8 | |
| Cash | SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 9 | SelectCreditDebitItem 10 | SelectCreditDebitItem 11 | SelectCreditDebitItem 12 |
| Common Stock | SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 13 | SelectCreditDebitItem 14 | SelectCreditDebitItem 15 | SelectCreditDebitItem 16 |
| Depreciation Expense | SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 17 | SelectCreditDebitItem 18 | SelectCreditDebitItem 19 | SelectCreditDebitItem 20 |
| Equipment | SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 21 | SelectCreditDebitItem 22 | SelectCreditDebitItem 23 | SelectCreditDebitItem 24 |
| Income Taxes Expense | SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 25 | SelectCreditDebitItem 26 | SelectCreditDebitItem 27 | SelectCreditDebitItem 28 |
| Interest Expense | SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 29 | SelectCreditDebitItem 30 | SelectCreditDebitItem 31 | SelectCreditDebitItem 32 |
| Land | SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 33 | SelectCreditDebitItem 34 | SelectCreditDebitItem 35 | SelectCreditDebitItem 36 |
| Notes Payable | SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 37 | SelectCreditDebitItem 38 | SelectCreditDebitItem 39 | SelectCreditDebitItem 40 |
| Prepaid Rent | SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 41 | SelectCreditDebitItem 42 | SelectCreditDebitItem 43 | SelectCreditDebitItem 44 |
| SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 45 | SelectCreditDebitItem 46 | SelectCreditDebitItem 47 | SelectCreditDebitItem 48 | |
| Salaries Expense | SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 49 | SelectCreditDebitItem 50 | SelectCreditDebitItem 51 | SelectCreditDebitItem 52 |
| Service Revenue | SelectAssetContra AssetEquityExpenseLiabilityRevenueItem 53 | SelectCreditDebitItem 54 | SelectCreditDebitItem 55 | SelectCreditDebitItem 56 |
| Supplies |
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