Section B Question One Rukus trading company extracted the following balances from its books on 31 December 2021. Capital Furniture and Equipment Accumulated Depreciation (Furniture & Equipment) Cash drawings Inventory on hand 1/1/2013 Purchases Sales Rent Insurance Salaries Telephone & Postage Discount allowed Discount Received Bad debts Accounts receivables Cash Provision for doubtful debts Carriage inward Accounts payables Carriage outward Returns inward Returns outward Land and Building Bank N 240,000 80,000 32,760 50,000 40,000 206,000 412,000 4,300 5,700 7,000 14,000 5,000 9,000 3,300 92,400 7,000 2,600 2,000 64,500 1,200 12,100 9,600 210,000 30,460 Notes: a) Inventory on hand 31/12/2021 is valued at N62,900 b) Provision is to be made for the following accrued expenses at 31/12/2021-rent N1,200, salaries N1,500, c) Prepayments at 31/12/2021 include the following; insurance N1,300, telephone and postage N8,000. d) Provision for doubtful debts is to be N3,000. e) Furniture and equipment is to be depreciated at 10% on the carrying value. Required: Prepare Rukus Statement of Profit or Loss statement for the year ended 31 December 2021. ii. Prepare the company's statement of financial position as at 31 December 2021
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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