The following list of balances has been extracted from the books of Danny Ltd. £ Accounts payable 16,120 Accounts receivable 16,480 Carriage inwards 2,440 Computer equipment at cost 10,000 Carriage outwards 4,000 Drawings 6,500 Electricity 7,000 Loan interest 480 Provisions for doubtful debt 1,000 Insurance 1,500 Motor vehicles at cost 51,200 Capital 84,760 Opening inventory 3,600 Accumulated depreciation – motor vehicles 9,200 Petty cash 40 Bank 59,120 Purchases 26,400 Rent 5,600 Sales 60,600 Telephone 4,320 Long-term Loan 27,000 The following information is also available: i. The value of inventory as at 31st December 2019 was £10,200 ii. Motor vehicles are to be depreciated at 20% on reducing balance basis and computer equipment at 10% on cost. iii. An electricity bill for £1,000 for the last three months to 31st December 2019 did not arrive early, so this is yet to be reflected in the books iv. Of the insurance payments, £500 is for the year ending 31st December 2020. v. Unpaid taxes for the period amount to £1,920 Required: a) Complete the Journal entries required to reflect the above additional information
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.
The following list of balances has been extracted from the books of Danny Ltd.
£ Accounts payable 16,120 Accounts receivable 16,480 Carriage inwards 2,440 Computer equipment at cost 10,000 Carriage outwards 4,000 Drawings 6,500 Electricity 7,000 Loan interest 480 Provisions for doubtful debt 1,000 Insurance 1,500 Motor vehicles at cost 51,200 Capital 84,760 Opening inventory 3,600
i. The value of inventory as at 31st December 2019 was £10,200 ii. Motor vehicles are to be
Required:
a) Complete the
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