Exercise 3 Using the following items (only the appropriate ones) prepare the balance sheet of "Toto" Ltd. Revaluation reserve Unfinished products Y Accumulated depreciation of vehicles Net profit Accumulated loss of previous years 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. Shares of Pupu Ltd (resale within 3 months) Short term deferred costs Acquired trade mark (initial value) Shares of Toto Ltd (resale within 3 months) Provisions for retirement obligations Share capital Taxes and fees Losses in the disposal of investments Cash at bank Net value of vehicles Real property (investment, net value) Negative goodwill Debt securities (payment within 12 months) Shares of Lolo Ltd (resale within 3 months) Trade payables (payment after 12 months) Trade receivables with maturity after 12 months Accumulated depreciation of buildings Accumulated depreciation of real property (investments) Goods for resale Deferred tax provisions Wages and salaries Purchase value of buildings Accumulated amortization of trade mark 26. 27. 28. 29. Issued bonds (10 years to maturity) 30. Deferred tax assets 3 400 1000 3 000 12 000 1 000 1 800 3 000 7 500 3 000 2 500 ? 3 000 1000 1 500 7 000 1000 1000 3 100 2 300 7 300 17 000 2 000 2 000 5 000 3 000 2 000 11 000 2 000 3 600 1 000
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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