QUESTION 3 Statement of Financial Position as at 31 December 2019 H S Ordinary Share Capital 1,000,000 500,000 Retained Profit 400,000 110,000 Current Liabilities 100,000 20,000 1,500,000 630,000 Land 100,000 100,000 Building at cost 450,000 400,000 Accumulated Depreciation -50,000 -100,000 Other non-current assets 100,000 200,000 750,000 Investment in S- Ordinary shares at cost Current Assets 150,000 30,000 1,500,000 630,000 Additional Information : a) H acquired 400,000 of the 500,000 ordinary shares of S on 1 January 2019 when the retained profit of S has a credit balance of RM70,000. b) On the date of acquisition of S, the fair value of land of S was RM20,000 more than its carrying amount of RM100,000. Inventory of S had a fair value that was RM5,000 more than its carrying amount. As at the end of the current year, this inventory had been sold. c) As at 31 December 2019, the fair values of the land of H and S were RM130,000 and RM145,000 respectively. The group's policy is to measure all land at fair value. d) There was no purchase or sale of land in year 2019. Required: Prepare the consolidated statement of financial position of H and S as at 31 December 2019.
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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