onsider the unadjusted trial balance of Riverdale Company at June 30, 2016, and the related month-end adjustment data. Riverdale Company Trial Balance 30-Jun-16 Balance Debit Credit Cash 6,900 Accounts receivable 1,100 Prepaid rent 3,500 Supplies 1,100 Motor Vehicle 77,000 Accumulated depreciation 3,400 Accounts payable 3,300 Salary payable Riverdale, capital 80,000 Riverdale, drawing 4,400 Service revenue 9,600 Salary expense 1,500 Rent expense Fuel expense 800 Depreciation expense Supplies expense 96,300 96,300 Adjustment data at June 30 follow: Accrued service revenue at June 30, $1,500 $700 of the prepaid rent expired during the month. Supplies on hand at June 30, $700 Depreciation on motor vehicle for the month, $1,400. Accrued salary expense at June 30, $300 Requirement: From the information presented, prepare the adjusting entries for items 1-5 above and then prepare the company’s adjusted trial balance as at June 30, 2016 Prepare the income statement for the year ended June 30, 2016 Prepare the owner’s equity statement for June 30, 2016 Prepare the balance sheet as at June 30,2016
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.
Consider the unadjusted
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Riverdale Company |
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Trial Balance |
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30-Jun-16 |
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Balance |
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Debit |
Credit |
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Cash |
6,900 |
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1,100 |
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Prepaid rent |
3,500 |
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Supplies |
1,100 |
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Motor Vehicle |
77,000 |
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3,400 |
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Accounts payable |
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3,300 |
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Salary payable |
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Riverdale, capital |
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80,000 |
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Riverdale, drawing |
4,400 |
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Service revenue |
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9,600 |
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Salary expense |
1,500 |
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Rent expense |
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Fuel expense |
800 |
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Depreciation expense |
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Supplies expense |
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96,300 |
96,300 |
Adjustment data at June 30 follow:
- Accrued service revenue at June 30, $1,500
- $700 of the prepaid rent expired during the month.
- Supplies on hand at June 30, $700
- Depreciation on motor vehicle for the month, $1,400.
- Accrued salary expense at June 30, $300
Requirement:
- From the information presented, prepare the
adjusting entries for items 1-5 above and then prepare the company’s adjusted trial balance as at June 30, 2016 - Prepare the income statement for the year ended June 30, 2016
- Prepare the owner’s equity statement for June 30, 2016
- Prepare the balance sheet as at June 30,2016
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