NoDirt, Inc. was incorporated on June 1, 2017 as a cleaning company. Questions 1 to 11 are based on NoDirt’s transactions during their 1st month of operation. June 1, 2017 – Issued stock to new owners and received $10,000 cash from the new owners. Aaccounr name.................................Debit.................................Credit PART A June 1, 2017 – Paid $1,500 cash to the landlord for June’s rent. NoDirt does not record the monthly rent as an asset b
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.
NoDirt, Inc. was incorporated on June 1, 2017 as a cleaning company. Questions 1 to 11 are based on NoDirt’s transactions during their 1st month of operation.
June 1, 2017 – Issued stock to new owners and received $10,000 cash from the new owners.
Aaccounr name.................................Debit.................................Credit
PART A
June 1, 2017 – Paid $1,500 cash to the landlord for June’s rent. NoDirt does not record the monthly rent as an asset because the rent will be totally consumed by the end of the month.
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A. Cash 1,500
Rent Expense 1,500
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B. Prepaid Rent 1,500
Cash 1,500
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C. Rent Expense 1,500
Cash 1,500
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D. Cash 1,500
Prepaid Rent 1,500
5
E. None of the above
PART BJune 1, 2017 – NoDirt paid $6,000 to Ace Machine Company for a commercial floor buffing machine. The buffing machine will be
depreciated over a 5 year life.-
A. Equipment Expense 6,000
Cash 6,000
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B.
Accounts Receivable 6,000Cash 6,000
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C. Cash 6,000
Equipment 6,000
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D. Cash 6,000
Accumulated Depreciation 6,000 -
E. None of the above
PART C
June 2, 2017 – NoDirt purchased $5,000 of cleaning supplies on credit (invoice payable in 15 days). NoDirt’s accounting policy is to record the purchase of cleaning supplies to an asset account.
Accounr name...................................Debit..................................Credit
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A. Supplies Expense 5,000
Cash 5,000
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B.
Retained Earnings 5,000Accounts Payable 5,000
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C. Supplies 5,000
Accounts Payable 5,000
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D. Supplies Expense 5,000
Accounts Payable 5,000
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E. None of the above
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