IDENTIFICATION OF AN ASSETS, LIABILITY, EQUITY, INCOME, EXPENSES or WITHDRAWAL For each of the following instructions, indicate the following: ASSETS- if the transaction results to an asset LIABILITY- if the transaction results to a liability EQUITY- if the transaction results to an equity INCOME - if the transaction results to an income EXPENSE - if the transaction results to an expense WITHDRAWAL- if the transaction results to a withdrawal N/A- if the transaction does not result to any of the elements. Payment for loans payable Payment for the purchase of building Collection of interest income Payment for fund withdrawal of the business owner Payment for the rent of the office building Payment for rental for the next three months. Payment for accrued interest liability Accrued and unpaid salaries of employee Exchange of land asset for a machinery asset. The owner took goods from the business for his personal consumption. Newly born animal offspring Accrued and unpaid interest on borrowing of clients. Accrued and unpaid interest on borrowing of the business. Theft of several goods in the business premises. Sale of P10,000 goods for P7,000 cash. Rendering of services to a client on account. Receipts of rentals for the next twelve months. Receipts of interest on loans receivable for the last six months. Collection of receivables previously billed to clients. Receipt of cash from owner as additional capital Contribution of land and building from the owner to be used as the new business office. Receipts of goods from supplier with a billing invoice. Temporary borrowing of a certain machinery from a friend of the business owner. Sale of building costing P1,000,000 for P1,400,000. Billed a client for services already done. Receipt of cash from clients for services to be provided in the future. Receipt of cash for services rendered to clients. Receipts of cash from collection of receivables Collection of rentals from lessees. Receipt of electric bill for the previous month Purchase of goods for cash Purchase of supplies on credit. Payment of cash to owner. Investment of additional funds by owner. Bonus.
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.
IDENTIFICATION OF AN ASSETS, LIABILITY, EQUITY, INCOME, EXPENSES or WITHDRAWAL
For each of the following instructions, indicate the following:
ASSETS- if the transaction results to an asset
LIABILITY- if the transaction results to a liability
EQUITY- if the transaction results to an equity
INCOME - if the transaction results to an income
EXPENSE - if the transaction results to an expense
WITHDRAWAL- if the transaction results to a withdrawal
N/A- if the transaction does not result to any of the elements.
- Payment for loans payable
- Payment for the purchase of building
- Collection of interest income
- Payment for fund withdrawal of the business owner
- Payment for the rent of the office building
- Payment for rental for the next three months.
- Payment for accrued interest liability
- Accrued and unpaid salaries of employee
- Exchange of land asset for a machinery asset.
- The owner took goods from the business for his personal consumption.
- Newly born animal offspring
- Accrued and unpaid interest on borrowing of clients.
- Accrued and unpaid interest on borrowing of the business.
- Theft of several goods in the business premises.
- Sale of P10,000 goods for P7,000 cash.
- Rendering of services to a client on account.
- Receipts of rentals for the next twelve months.
- Receipts of interest on loans receivable for the last six months.
- Collection of receivables previously billed to clients.
- Receipt of cash from owner as additional capital
- Contribution of land and building from the owner to be used as the new business office.
- Receipts of goods from supplier with a billing invoice.
- Temporary borrowing of a certain machinery from a friend of the business owner.
- Sale of building costing P1,000,000 for P1,400,000.
- Billed a client for services already done.
- Receipt of cash from clients for services to be provided in the future.
- Receipt of cash for services rendered to clients.
- Receipts of cash from collection of receivables
- Collection of rentals from lessees.
- Receipt of electric bill for the previous month
- Purchase of goods for cash
- Purchase of supplies on credit.
- Payment of cash to owner.
- Investment of additional funds by owner.
- Bonus.
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