The 2014 comparative balance sheet and 2014 income statement of Byfield Co Ltd, have just been distributed at a meeting of the company’s board of directors. The members of the board of directors were desirous of knowing the reason or reasons why the cash balance different from the net income. The company uses the indirect method to prepare the statement of cash flows and it is expected that this should be able to provide the needed clarity required by the directors. The directors have asked each student from your accounting course to assist with the needed clarification and have put forward the following financial information grouped according to your surname initial. (Hint!!!! Example surname Brown will use the initial B and that person should only use the info presented in line with the heading with their surname initial. You are not allowed to use info associated with initials other than that of your own as this will result in the forfeiture of the grade.) Having identified the information in line with your surname you are next required to address the requirements outline below. Financial info to be used by surnames with initials (D, T, L, U) Simple Things Industries Ltd. Comparative Balance Sheet December 31, 2014 and 2013 2014 2013 Increase/(Decrease) Assets Cash 215,800 208,300 ? Accounts Receivable 259,300 295,800 ? Inventories 348,800 395,500 ? Prepaid expenses 43,950 30,500 ? Intangible assets 185,450 185,450 ? Plant assets, net 1,000,000 895,500 ? Total Assets 2,053,300 2,011,050 Liabilities Accounts payable 245,500 263,330 ? Accrued liabilities 410,440 486,530 ? Income tax payable 135,940 125,250 ? Long-term notes payable 910,675 864,575 ? Stockholders' Equity Common Stock 310,000 258,500 ? Retained earnings 495,325 324,168 ? Treasury stock (454,580) (311,303) ? Total liabilities and stockholders' equity 2,053,300 2,011,050 Simple Things Industries Ltd Income Statement Year Ended December 31,2014 Revenues and gains: Sales revenue 2,432,502 Gain on sale of plant assets 125,250 Total revenues and gains 2,557,752 Expenses Cost of goods sold 1,390,000 Depreciation expense 174,350 Other operating expense 525,000 Total expenses 2,089,350 Income before income taxes 468,402 Income tax expense 225,000 Net Income 243,402 Notes Acquisition of plant asset during 2014 498,850 Sale proceed from sale of plant asset 345,250 Receipt for issuance of notes payable 556,100 Payment for note payable 510,000 Dividend paid 72,245 Book value of equipment sold 220,000 Requirements 1. Reconstruct the company’s comparative balance sheet for 2013/2014 using the information in line with your surname initial and compute and show the missing figures to include the appropriate sign as a positive or negative figure. 2. Which category of the statement of cash flow is considered as the most important? Why? 3. Prepare a complete statement of cash flows for 2014
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 2014 comparative balance sheet and 2014 income statement of Byfield Co Ltd, have just been distributed at a meeting of the company’s board of directors. The members of the board of directors were desirous of knowing the reason or reasons why the cash balance different from the net income. The company uses the indirect method to prepare the statement of cash flows and it is expected that this should be able to provide the needed clarity required by the directors.
The directors have asked each student from your accounting course to assist with the needed clarification and have put forward the following financial information grouped according to your surname initial. (Hint!!!! Example surname Brown will use the initial B and that person should only use the info presented in line with the heading with their surname initial. You are not allowed to use info associated with initials other than that of your own as this will result in the forfeiture of the grade.)
Having identified the information in line with your surname you are next required to address the requirements outline below.
Financial info to be used by surnames with initials (D, T, L, U)
Simple Things Industries Ltd.
Comparative Balance Sheet
December 31, 2014 and 2013
2014 2013 Increase/(Decrease)
Assets
Cash 215,800 208,300 ?
Accounts Receivable 259,300 295,800 ?
Inventories 348,800 395,500 ?
Prepaid expenses 43,950 30,500 ?
Intangible assets 185,450 185,450 ?
Plant assets, net 1,000,000 895,500 ?
Total Assets 2,053,300 2,011,050
Liabilities
Accounts payable 245,500 263,330 ?
Accrued liabilities 410,440 486,530 ?
Income tax payable 135,940 125,250 ?
Long-term notes payable 910,675 864,575 ?
Common Stock 310,000 258,500 ?
Total liabilities and stockholders' equity 2,053,300 2,011,050
Simple Things Industries Ltd
Income Statement
Year Ended December 31,2014
Revenues and gains:
Sales revenue 2,432,502
Gain on sale of plant assets 125,250
Total revenues and gains 2,557,752
Expenses
Cost of goods sold 1,390,000
Other operating expense 525,000
Total expenses 2,089,350
Income before income taxes 468,402
Income tax expense 225,000
Net Income 243,402
Notes
Acquisition of plant asset during 2014 498,850
Sale proceed from sale of plant asset 345,250
Receipt for issuance of notes payable 556,100
Payment for note payable 510,000
Dividend paid 72,245
Book value of equipment sold 220,000
Requirements
1. Reconstruct the company’s comparative balance sheet for 2013/2014 using the information in line with your surname initial and compute and show the missing figures to include the appropriate sign as a positive or negative figure.
2. Which category of the statement of cash flow is considered as the most important? Why?
3. Prepare a complete statement of cash flows for 2014
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