he Income Statement and Balance Sheet columns below are from the work sheet of the Mandle Company for the year ended December 31, 20--. Mandle Company Work Sheet (partial) For the year ended December 31, 20-- Income Statement Balance Sheet Account Title Debit Credit Debit Credit Cash 24,000 Accounts Receivable 12,500 Merchandise Inventory 8,000 Store Supplies 550 Office Supplies 1,200 Prepaid Insurance 750 Store Equipment 33,000 Accumulated Depreciation—Store Equipment 19,000 Office Equipment 9,000 Accumulated Depreciation—Office Equipment 5,000 Accounts Payable 9,900 Salaries Payable 200 Long-Term Notes Payable 18,000 H. Mandle, Capital 45,300 H. Mandle, Drawing 16,000 Income Summary 8,500 8,000 Sales 31,000 Sales Returns and Allowances 250 Purchases 13,500 Purchases Returns and Allowances 350 Purchases Discounts 200 Sales Salary Expense (selling) 4,600 Office Salary Expense (general) 3,500 Store Supplies Expense (selling) 150 Office Supplies Expense (general) 200 Insurance Expense (general) 400 Depreciation Expense—Store Equipment (selling) 400 Depreciation Expense—Office Equipment (general) 450 31,950 39,550 105,000 97,400 Net Income 7,600 7,600 39,550 39,550 105,000 105,000 Required: Prepare a multi-step income statement for Mandle Company for the current fiscal year. Include separate sections for selling expenses and general expenses under the heading "Operating Expenses" by using the classifications provided in the Account Title column of the work sheet.
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.
The Income Statement and Balance Sheet columns below are from the work sheet of the Mandle Company for the year ended December 31, 20--.
| Mandle Company Work Sheet (partial) For the year ended December 31, 20-- |
|||||||
| Income Statement | Balance Sheet | ||||||
| Account Title | Debit | Credit | Debit | Credit | |||
| Cash | 24,000 | ||||||
| 12,500 | |||||||
| Merchandise Inventory | 8,000 | ||||||
| Store Supplies | 550 | ||||||
| Office Supplies | 1,200 | ||||||
| Prepaid Insurance | 750 | ||||||
| Store Equipment | 33,000 | ||||||
| Accumulated |
19,000 | ||||||
| Office Equipment | 9,000 | ||||||
| Accumulated Depreciation—Office Equipment | 5,000 | ||||||
| Accounts Payable | 9,900 | ||||||
| Salaries Payable | 200 | ||||||
| Long-Term Notes Payable | 18,000 | ||||||
| H. Mandle, Capital | 45,300 | ||||||
| H. Mandle, Drawing | 16,000 | ||||||
| Income Summary | 8,500 | 8,000 | |||||
| Sales | 31,000 | ||||||
| Sales Returns and Allowances | 250 | ||||||
| Purchases | 13,500 | ||||||
| Purchases Returns and Allowances | 350 | ||||||
| Purchases Discounts | 200 | ||||||
| Sales Salary Expense (selling) | 4,600 | ||||||
| Office Salary Expense (general) | 3,500 | ||||||
| Store Supplies Expense (selling) | 150 | ||||||
| Office Supplies Expense (general) | 200 | ||||||
| Insurance Expense (general) | 400 | ||||||
| Depreciation Expense—Store Equipment (selling) | 400 | ||||||
| Depreciation Expense—Office Equipment (general) | 450 | ||||||
| 31,950 | 39,550 | 105,000 | 97,400 | ||||
| Net Income | 7,600 | 7,600 | |||||
| 39,550 | 39,550 | 105,000 | 105,000 |
Required:
Prepare a multi-step income statement for Mandle Company for the current fiscal year. Include separate sections for selling expenses and general expenses under the heading "Operating Expenses" by using the classifications provided in the Account Title column of the work sheet.
| Mandle Company | ||||
| Income Statement | ||||
| For the year ended December 31, 20-- | ||||
| Revenue: | ||||
| Purchases | $fill in the blank 2 | |||
| Less: Purchases discounts | fill in the blank 4 | |||
| Net purchases | $fill in the blank 6 | |||
| Cost of goods sold: | ||||
| Merchandise inventory, December 31, 20-- | $fill in the blank 8 | |||
| Purchases | $fill in the blank 10 | |||
| Less: Purchases returns and allowances | $fill in the blank 12 | |||
| Less: Purchases discounts | fill in the blank 14 | fill in the blank 15 | ||
| Income from operations | fill in the blank 17 | |||
| $fill in the blank 19 | ||||
| fill in the blank 21 | ||||
| fill in the blank 23 | ||||
| $fill in the blank 25 | ||||
| Operating expenses: | ||||
| Selling expenses: | ||||
| Sales salary expense | $fill in the blank 27 | |||
| Sales | fill in the blank 29 | |||
| fill in the blank 31 | ||||
| Total selling expenses | $fill in the blank 32 | |||
| General expenses: | ||||
| Office salary expense | $fill in the blank 34 | |||
| Office supplies expense | fill in the blank 36 | |||
| Insurance expense | fill in the blank 38 | |||
| fill in the blank 40 | ||||
| Total general expenses | fill in the blank 41 | |||
| Total operating expenses | fill in the blank 42 | |||
| Net income | $fill in the blank 44 |
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