The cash book column of Wekesa showed a credit balance of Sh.1,040,350 while the bank statement balance showed an overdraft of Sh.1,398,000 on 31st July 2019. A detailed comparison of entries revealed the following; Cheques paid to the following creditors were not presented for payment at the bank; Mumbi Sh.195,400, Yash Sh.32,500, Sidhu Sh.164,300 On 31st July 2019, the sales made were Sh.1,053,700 and were deposited in the evening. However, the sales were not recorded by the bank until the following day. iii) i) ii) The bank paid an insurance premium of Sh.75,300 because of a standing order arranged by Wekesa The bank deducted Sh.45,550 bank charges which were not yet recorded in the iv) cash book v) Interest received on a fixed deposit Sh.160,000 had not yet been recorded by the business. vi) The bank had received on behalf of Wekesa, a credit transfers of Sh.246,700 from Obiri A cheque for Sh.135,500 which was paid by the bank was entered in the cash| book as Sh.153,500 vii) Required: a) Adjusted cash book b) Bank reconciliation statement as at 31 t July 2019
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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