Question 3 Aminu Ltd started a delivery service, Aminu Ltd Deliveries, on June 1, 20X1. The following transactions occurred during the month of June. June 1 Aminu Ltd invested AED10,000 cash to start the delivery company. 2 Purchased a used van for deliveries for AED12,000. Aminu Ltd paid AED2,000 cash and signed a note payable for the remaining balance. 1 3 Paid AED500 for office rent for the month. 5 Performed AED4,400 of services on account. 9 Declared and paid AED200 in cash dividends. 12 Purchased supplies for AED150 on account. 15 Received a cash payment of AED1,250 for services provided on June 5. 17 Purchased gasoline for AED100 on account. 20 Received a cash payment of AED1,500 for services provided. 23 Made a cash payment of AED500 on the notes payable. 26 Paid AED250 for utilities. 29 Paid for the gasoline purchased on account on June 17. 30 Paid AED1,000 for employee salaries Required to: [a] Prepare an income statement for the month of June. [b] Prepare a statement of financial position at June 30, 20X1.
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.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps