Liabilities and assets of M/s Rogers Ltd. as at 31st March, 2016 is as follows: Liabilities Assets Paid-up Capital : 8,000 Equity Shares of $100 Fixed Assets : Land, Building and Machinery 14,00,000 each fully paid 8,00,000 Current Assets : Secured Loan : Stock 1,00,000 8% Debentures 14,00,000 Sundry Debtors 40,000 Accrued Interest on Debentures 70,000 Investments 15,000 Sundry Creditors 4,50,000 Cash at Bank 1,03,000 Income Tax Liability 10,000 Cash in Hand 2,000 Surplus Account (Dr. Balance) 10,70,000 27,30,000 27,30,000 The fixed assets are heavily overvalued. A scheme of reorganisation was prepared and passed. The salient points of the scheme are the following: (1) Each share shall be sub-divided into ten fully paid Equity Shares of $10 each. (2) After such sub-division, each shareholder shall surrender to the company 90% of his holding, for the purpose of reissue to Debentureholders and Creditors so far as required and otherwise for cancellation. (3) of those surrendered 50,000 Equity Shares of $10 each, shall be converted into 8% Preference Shares of 10 each fully paid for debentureholders. (4) The debentureholders' total claim shall be reduced to $5,00,000. This will be satisfied by the issue of 50,000 preference shares of $10 each fully paid. (5) The claim of sundry creditors shall be reduced by 80% and the balance shall be satisfied by allotting them Equity Shares of 10 each, fully paid from the shares surrendered. (6) Shares surrendered and not reissued shall be cancelled. Assuming that the scheme is duly approved by all parties interested and by the court, draft necessary Journal Entries and Balance Sheet of the company after the scheme has been carried into effect.
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.
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