Following Trial Balance was prepared by the accountant of “Market-ing For You” for the year ended 31st March 2021. Debit Credit Service income 170000 Capital 40800 Land and buildings 125000 Furniture and fixtures 50000 Prepaid insurance 6000 Electricity 7800 Travelling expenses 3000 Debtors 65000 Creditors 42000 Accumulated depreciation: Land and buildings 45000 Accumulated depreciation: Furniture and fixtures 15000 Provision for doubtful debt 3000 Cash 25000 Rental income 8000 Telephone expenses 4000 Unearned revenue 2000 Investment 50000 Bank loan 10000 Additional information Non-current assets are depreciated at 10% per annum Insurance expired 4800 Rental income receivable 4000 Provision for doubtful debt is 5% on debtors Accrued electricity 600 Prepare the year-end financial statements for “Market-ing For You”. Income statement Balance sheet Statement of Owner’s Equity
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
Trial Balance was prepared by the accountant of “Market-ing For You” for the year ended 31st March 2021.
|
|
Debit |
Credit |
|
Service income |
|
170000 |
|
Capital |
|
40800 |
|
Land and buildings |
125000 |
|
|
Furniture and fixtures |
50000 |
|
|
Prepaid insurance |
6000 |
|
|
Electricity |
7800 |
|
|
Travelling expenses |
3000 |
|
|
Debtors |
65000 |
|
|
Creditors |
|
42000 |
|
Accumulated |
|
45000 |
|
Accumulated depreciation: Furniture and fixtures |
|
15000 |
|
Provision for doubtful debt |
|
3000 |
|
Cash |
25000 |
|
|
Rental income |
|
8000 |
|
Telephone expenses |
4000 |
|
|
Unearned revenue |
|
2000 |
|
Investment |
50000 |
|
|
Bank loan |
|
10000 |
- Additional information
- Non-current assets are depreciated at 10% per annum
- Insurance expired 4800
- Rental income receivable 4000
- Provision for doubtful debt is 5% on debtors
- Accrued electricity 600
- Prepare the year-end financial statements for “Market-ing For You”.
- Income statement
- Balance sheet
- Statement of Owner’s Equity
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