Question SMOLIRA GOLF CORP. Balance Sheet as of December 31, 2015 ASSETS LIABILITIES & OWNER'S EQUITY Current Assets: Current Liabilities: Cash Rs.710 Accounts Payable Rs.1,215 Accounts Receivable 2106 Notes Payable 718 Inventory 4982 Other 230 Total Rs.7,798 Total C L Rs.2,163 Fixed Assets: Long-term debt Rs.4,190 Net plant and Equipment Rs.18,584 Owner's Equity: Common Stock and paid-in surplus Rs.10,000 Retained Earnings Rs.10,029 Total Rs.20,029 Total Assets Rs.26,382 Total Rs.26,382 SMOLIRA GOLF CORP. Income Statement as on December 31, 2011 Sales Rs.28,000 Less: Cost of goods sold 11,600 Depreciation 2,140 Earnings before interest and taxes Rs.14,260 Less:Interest paid 980 Taxable Income Rs.13,280 Taxes (35%) 4,648 Net Income Rs.8,632 Dividend Rs.4000 Addition to retained Earnings 4,632 Long-term solvency ratios i. Equity multiplier j. Times interest earned ratio Profitability Ratios: k. Profit Margin l. Return on Assets m. Return on equity
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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SMOLIRA GOLF CORP. |
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Balance Sheet as of December 31, 2015 |
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ASSETS |
LIABILITIES & OWNER'S EQUITY |
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Current Assets: |
Current Liabilities: |
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Cash |
Rs.710 |
Accounts Payable |
Rs.1,215 |
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Accounts Receivable |
2106 |
Notes Payable |
718 |
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Inventory |
4982 |
Other |
230 |
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Total |
Rs.7,798 |
Total C L |
Rs.2,163 |
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Fixed Assets: |
Long-term debt |
Rs.4,190 |
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Net plant and Equipment |
Rs.18,584 |
Owner's Equity: |
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Common Stock and paid-in surplus |
Rs.10,000 |
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Rs.10,029 |
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Total |
Rs.20,029 |
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Total Assets |
Rs.26,382 |
Total |
Rs.26,382 |
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SMOLIRA GOLF CORP. |
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Income Statement as on December 31, 2011 |
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Sales |
Rs.28,000 |
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Less: Cost of goods sold |
11,600 |
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2,140 |
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Earnings before interest and taxes |
Rs.14,260 |
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Less:Interest paid |
980 |
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Taxable Income |
Rs.13,280 |
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Taxes (35%) |
4,648 |
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Net Income |
Rs.8,632 |
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Dividend |
Rs.4000 |
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Addition to retained |
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Earnings |
4,632 |
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Long-term solvency ratios |
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i. Equity multiplier |
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j. Times interest earned ratio |
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Profitability Ratios: |
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k. Profit Margin |
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l. |
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m. |
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