SEPTEMBER 2019: In September 2019, Kate incorporated Kate’s Cards after investigating different organizational forms, and began the process of getting her business up and running. The following events occurred during the month of September 2019: Kate deposited $10,000 that she had saved into a newly opened business checking account. She received common stock in exchange. Kate designed a brochure that she will use to promote her greeting cards at local stationery stores. Kate paid Fred Simmons $50 to critique her brochure before undertaking her final design and printing. Kate purchased a new iMac computer tablet, specialized graphic arts software, and commercial printer for the company, paying $4,800 in cash. She decided to record all of these items under the same equipment account. Kate purchased supplies such as paper and ink for $350 at the local stationery store. She opened a business account with the store and was granted 30 days credit on all purchases, including the one she just made. Kate designed her first 5 cards and prepared to show them to potential customers. The owner of the stationery store where Kate opened her account was impressed with Kate’s work and ordered 1,000 of each of the five card designs at a cost of $1 per card, or $5,000 total. Kate tells the customer that she will have them printed and delivered within the week. Kate purchased additional supplies, on account, in the amount of $1,500. Kate delivered the 5,000 cards. Because the owner knows that Kate is just starting out, he paid her immediately in cash. He informed her that if the cards sell well that he will be ordering more, but would expect a 30-day credit period like the one he grants to his own business customers. The cost to Kate for the order was $1,750 of the supplies she had purchased. (Hint: This cost should be recorded as a debit to an expense called Cost of Goods Sold.) Kate paid her balance due for the supplies in full. Kate purchased a one-year insurance policy for $1,200, paying the entire amount in cash. (Hint: Two accounts will need to be debited here, one for the current month expense and one for the prepaid amount.) Kate determined that all of her equipment will have a useful life of 4 years (48 months) at which time it will not have any resale or scrap value. (Hint: Kate will expense 1/48th of the cost of the equipment each month to Depreciation Expense. The credit will be to Accumulated Depreciation.) Kate paid herself a salary of $1,000 for the month. Kate paid rent expense for the month in the amount of $1,200. September Requirements:. Post the accounting transactions for the month of September 2019 to the general ledger accounts
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.
FP#1
SEPTEMBER 2019:
In September 2019, Kate incorporated Kate’s Cards after investigating different organizational forms, and began the process of getting her business up and running. The following events occurred during the month of September 2019:
- Kate deposited $10,000 that she had saved into a newly opened business checking account. She received common stock in exchange.
- Kate designed a brochure that she will use to promote her greeting cards at local stationery stores.
- Kate paid Fred Simmons $50 to critique her brochure before undertaking her final design and printing.
- Kate purchased a new iMac computer tablet, specialized graphic arts software, and commercial printer for the company, paying $4,800 in cash. She decided to record all of these items under the same equipment account.
- Kate purchased supplies such as paper and ink for $350 at the local stationery store. She opened a business account with the store and was granted 30 days credit on all purchases, including the one she just made.
- Kate designed her first 5 cards and prepared to show them to potential customers.
- The owner of the stationery store where Kate opened her account was impressed with Kate’s work and ordered 1,000 of each of the five card designs at a cost of $1 per card, or $5,000 total. Kate tells the customer that she will have them printed and delivered within the week.
- Kate purchased additional supplies, on account, in the amount of $1,500.
- Kate delivered the 5,000 cards. Because the owner knows that Kate is just starting out, he paid her immediately in cash. He informed her that if the cards sell well that he will be ordering more, but would expect a 30-day credit period like the one he grants to his own business customers.
- The cost to Kate for the order was $1,750 of the supplies she had purchased. (Hint: This cost should be recorded as a debit to an expense called Cost of Goods Sold.)
- Kate paid her balance due for the supplies in full.
- Kate purchased a one-year insurance policy for $1,200, paying the entire amount in cash. (Hint: Two accounts will need to be debited here, one for the current month expense and one for the prepaid amount.)
- Kate determined that all of her equipment will have a useful life of 4 years (48 months) at which time it will not have any resale or scrap value. (Hint: Kate will expense 1/48th of the cost of the equipment each month to
Depreciation Expense. The credit will be to Accumulated Depreciation.) - Kate paid herself a salary of $1,000 for the month.
- Kate paid rent expense for the month in the amount of $1,200.
September Requirements:.
Post the accounting transactions for the month of September 2019 to the general ledger accounts.
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