Following is the trial balance of Orange Company on December 31, 2011, the end of the fiscal year: Acct. No. Account Title Debits Credits 101 Cash 21,000 111 Accounts receivable 40,000 130 Merchandise Inventory 15,000 136 Store Supplies 30,000 165 Store Equipment 150,000 166 Accumulated Depreciation- Store Equipment 40,000 201 Accounts Payable 30,000 202 Notes Payable (due 2012) 10,000 231 Unearned Rent 3,000 331 Common Stock 60,000 360 Retained Earnings 38,000 372 Dividends 2,000 401 Sales 352,000 403 Sales Discounts 5,000 501 Purchases 196,000 502 Transportation In 4,000 504 Purchases Discount 3,000 602 Sales Salaries Expense 40,000 703 Office Salaries Expense 20,000 711 Rent Expense 16,000 721 Utilities Expense 7,000 803 Rent Expense 10,000 Totals 546,000 546,000 The merchandise inventory at December 31, 2011, is 12,000. Data for adjustments are as follows: a. Store supplies on hand at December 31, 2011 have a valuation of 3,000. b. Depreciation of store equipment for 2011 is 12,000. c. Interest of 1,000 is accured on notes payable. d. Salaries earned as of December 31 but not due to be paid until January are 3,000; they are equally divided between sales salaries and office salaries. e. The last quarterly rent collection for November, December, and January was credited to Unearned Rent when collected on November 1, 2011. f. Estimated income tax expense is 10,000. 1. Enter the above balances in a work sheet and complete the work sheet. 2. Prepare (a) a multiple-step income statement, (b) a statement of owner's equity, and (c) a balance sheet. No additional shares of common stock were sold during the year. 3. Journalize the adjusting and the closing entries.
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.
Following is the
| Acct. No. | Account Title | Debits | Credits |
| 101 | Cash | 21,000 | |
| 111 | Accounts receivable | 40,000 | |
| 130 | Merchandise Inventory | 15,000 | |
| 136 | Store Supplies | 30,000 | |
| 165 | Store Equipment | 150,000 | |
| 166 | 40,000 | ||
| 201 | Accounts Payable | 30,000 | |
| 202 | Notes Payable (due 2012) | 10,000 | |
| 231 | Unearned Rent | 3,000 | |
| 331 | Common Stock | 60,000 | |
| 360 | 38,000 | ||
| 372 | Dividends | 2,000 | |
| 401 | Sales | 352,000 | |
| 403 | Sales Discounts | 5,000 | |
| 501 | Purchases | 196,000 | |
| 502 | Transportation In | 4,000 | |
| 504 | Purchases Discount | 3,000 | |
| 602 | Sales Salaries Expense | 40,000 | |
| 703 | Office Salaries Expense | 20,000 | |
| 711 | Rent Expense | 16,000 | |
| 721 | Utilities Expense | 7,000 | |
| 803 | Rent Expense | 10,000 | |
| Totals | 546,000 | 546,000 |
The merchandise inventory at December 31, 2011, is 12,000. Data for adjustments are as follows:
a. Store supplies on hand at December 31, 2011 have a valuation of 3,000.
b. Depreciation of store equipment for 2011 is 12,000.
c. Interest of 1,000 is accured on notes payable.
d. Salaries earned as of December 31 but not due to be paid until January are 3,000; they are equally divided between sales salaries and office salaries.
e. The last quarterly rent collection for November, December, and January was credited to Unearned Rent when collected on November 1, 2011.
f. Estimated income tax expense is 10,000.
1. Enter the above balances in a work sheet and complete the work sheet.
2. Prepare (a) a multiple-step income statement, (b) a statement of owner's equity, and (c) a
3. Journalize the adjusting and the closing entries.
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