Denzel Brooks opened a web consulting business called Venture Consultants and completed the following transactions in March. Mar. 1 Brooks invested $150,000 cash along with $22,000 in office equipment in the company. 2 The company prepaid $6,000 cash for six months’ rent for an office. Hint: Debit Prepaid Rent for $6,000. 3 The company made credit purchases of office equipment for $3,000 and office supplies for $1,200. Payment is due within 10 days. 6 The company completed services for a client and immediately received $4,000 cash. 9 The company completed a $7,500 project for a client, who must pay within 30 days. 12 The company paid $4,200 cash to settle the account payable created on March 3. 19 The company paid $5,000 cash for the premium on a 12-month insurance policy. Hint: Debit Prepaid Insurance for $5,000. 22 The company received $3,500 cash as partial payment for the work completed on March 9. 25 The company completed work for another client for $3,820 on credit. 29 Brooks withdrew $5,100 cash from the company for personal use. 30 The company purchased $600 of additional office supplies on credit. 31 The company paid $500 cash for this month’s utility bill. Required 1. Prepare general journal entries to record these transactions (use the account titles listed in part 2). 2. Open the following ledger accounts—their account numbers are in parentheses (use the balance column format): Cash (101); Accounts Receivable (106); Office Supplies (124); Prepaid Insurance (128); Prepaid Rent (131); Office Equipment (163); Accounts Payable (201); D. Brooks, Capital (301); D. Brooks, Withdrawals (302); Services Revenue (403); and Utilities Expense (690). Post the journal entries from part 1 to the ledger accounts and enter the balance after each posting. 3. Prepare a trial balance as of the end of March.
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.
Denzel Brooks opened a web consulting business called Venture Consultants and completed the following
transactions in March.
Mar. 1 Brooks invested $150,000 cash along with $22,000 in office equipment in the company.
2 The company prepaid $6,000 cash for six months’ rent for an office. Hint: Debit Prepaid Rent
for $6,000.
3 The company made credit purchases of office equipment for $3,000 and office supplies for
$1,200. Payment is due within 10 days.
6 The company completed services for a client and immediately received $4,000 cash.
9 The company completed a $7,500 project for a client, who must pay within 30 days.
12 The company paid $4,200 cash to settle the account payable created on March 3.
19 The company paid $5,000 cash for the premium on a 12-month insurance policy. Hint: Debit
Prepaid Insurance for $5,000.
22 The company received $3,500 cash as partial payment for the work completed on March 9.
25 The company completed work for another client for $3,820 on credit.
29 Brooks withdrew $5,100 cash from the company for personal use.
30 The company purchased $600 of additional office supplies on credit.
31 The company paid $500 cash for this month’s utility bill.
Required
1. Prepare general
2. Open the following ledger accounts—their account numbers are in parentheses (use the balance column
format): Cash (101); Accounts Receivable (106); Office Supplies (124); Prepaid Insurance (128);
Prepaid Rent (131); Office Equipment (163); Accounts Payable (201); D. Brooks, Capital (301);
D. Brooks, Withdrawals (302); Services Revenue (403); and Utilities Expense (690).
entries
3. Prepare a
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