How to do the post-adjustment trial balance of Fling Incorporated for the financial year ended 31 December 2021. Motor vehicles 50 000 Dt Accumulated depreciation on motor vehicles 5 000 Cr Debtors control 45 000 Dt Bank: one 7 550 Dt Bank two: 650 Cr Equipment 25 000 Dt Accumulated depreciation on equipment 2 100 Cr Creditors control 15 600 Cr Share capital 3 000 Cr Retained earnings 31 800 Cr Rental income 13 000 Cr Inventory: Finished products 8 500 Dt Sale of goods 135 000 Cr Water and electricity 8 800 Dt Salaries and wages 55 000 Cr Printing and stationery 6 300 Cr 206 150 (206 150) Adjustments: 1. Rental income earned monthly amounts to R1 000. 2. Printing and stationery on hand as at 31 December 2021 amounted to R800. 3. Cleaning expenses of R250 was incorrectly posted to the salaries and wages account. 4. Discount of R150 was given to a debtor who settled her account before due date. 5. The municipal account for December 2021 was not yet received. The monthly dues amount to R800. 6. Defective inventory of R600 was returned by a customer. 7. Mr Ralley’s business was placed under curatorship. His lawyers indicated that he can only settle 20c in the rand on this account. His account balance at 31 December 2021 amounted to R4 000. 8. Fling Incorporated adopted a policy to provide for 10% credit losses on the debtors accounts.
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.
How to do the post-adjustment
Motor vehicles
50 000 Dt
5 000 Cr
Debtors control
45 000 Dt
Bank: one
7 550 Dt
Bank two:
650 Cr
Equipment
25 000 Dt
Accumulated depreciation on equipment
2 100 Cr
Creditors control
15 600 Cr
Share capital
3 000 Cr
31 800 Cr
Rental income
13 000 Cr
Inventory: Finished products
8 500 Dt
Sale of goods
135 000 Cr
Water and electricity
8 800 Dt
Salaries and wages
55 000 Cr
Printing and stationery
6 300 Cr
206 150
(206 150) Adjustments:
1. Rental income earned monthly amounts to R1 000.
2. Printing and stationery on hand as at 31 December 2021 amounted to R800.
3. Cleaning expenses of R250 was incorrectly posted to the salaries and wages account.
4. Discount of R150 was given to a debtor who settled her account before due date.
5. The municipal account for December 2021 was not yet received. The monthly dues amount to R800.
6. Defective inventory of R600 was returned by a customer.
7. Mr Ralley’s business was placed under curatorship. His lawyers indicated that he can only settle 20c in the rand on this account. His account balance at 31 December 2021 amounted to R4 000.
8. Fling Incorporated adopted a policy to provide for 10% credit losses on the debtors accounts.
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