Prepare the income statement, balance sheet and statement of owner’s equity based on the information given below. Rudos Trial Balance as at 31 December 2019 Debit Credit Cash 5000 Supplies 3800 Sales 50000 Purchases 20000 Opening stock 5000 Prepaid insurance 4800 Accounts receivable 6000 Land 125000 Buildings 14000 Furniture 33600 Accounts payable 10600 Unearned rent revenue 7200 Mortgage payable 16600 Accumulated depreciation: Buildings 3400 Sue Phillips - Capital 120000 Rent revenue 18400 Advertising expense 1000 Salaries expense 6000 Utilities expense 2000 226200 226200 Additional information Closing stock $2000 Supplies on hand at the end of the period $1100 Depreciation for and furniture 10% per year Insurance expense per month $300 Bad debt to be written off $800 Unearned rent revenue earned $1000
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.
- Prepare the income statement,
balance sheet and statement of owner’s equity based on the information given below.
Rudos
as at 31 December 2019
|
|
Debit |
Credit |
|
Cash |
5000 |
|
|
Supplies |
3800 |
|
|
Sales |
|
50000 |
|
Purchases |
20000 |
|
|
Opening stock |
5000 |
|
|
Prepaid insurance |
4800 |
|
|
|
6000 |
|
|
Land |
125000 |
|
|
Buildings |
14000 |
|
|
Furniture |
33600 |
|
|
Accounts payable |
|
10600 |
|
Unearned rent revenue |
|
7200 |
|
Mortgage payable |
|
16600 |
|
|
|
3400 |
|
Sue Phillips - Capital |
|
120000 |
|
Rent revenue |
|
18400 |
|
Advertising expense |
1000 |
|
|
Salaries expense |
6000 |
|
|
Utilities expense |
2000 |
|
|
|
226200 |
226200 |
Additional information
- Closing stock $2000
- Supplies on hand at the end of the period $1100
- Depreciation for and furniture 10% per year
- Insurance expense per month $300
Bad debt to be written off $800- Unearned rent revenue earned $1000
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