The cash transactions for the first month of operation of a sole trader business are as follows; Date Transactions01/06/2021 The owner contributed $50,000 into business account07/06/2021 Received $30,000 for service rendered12/06/2021 Paid $3,000 for advertising15/06/2021 Paid rent for June, $5,000.20/06/2021 Withdrew $7,000 from the business bank account for personal use23/06/2021 Customer made a partial payment of $2,000 on an outstanding bill24/06/2021 Purchased equipment in cash for $8,00027/06/2021 Paid $2,500 on the open account relating to previous credit purchase28/06/2021 Paid wages of $4,50030/06/2021 Paid $500 for utilities usedBased on the cash transactions above, complete the cash ledger using a three column format.Note: You need to select [-] if no amount is required to enter.Cash at Bank Date Description Debit Credit Balance01/06/2021 brought down $001/06/2021 07/06/2021 12/06/2021 15/06/2021 20/06/2021 23/06/2021 24/06/2021 27/06/2021 28/06/2021 30/06/2021
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.
The cash transactions for the first month of operation of a sole trader business are as follows; Date Transactions01/06/2021 The owner contributed $50,000 into business account07/06/2021 Received $30,000 for service rendered12/06/2021 Paid $3,000 for advertising15/06/2021 Paid rent for June, $5,000.20/06/2021 Withdrew $7,000 from the business bank account for personal use23/06/2021 Customer made a partial payment of $2,000 on an outstanding bill24/06/2021 Purchased equipment in cash for $8,00027/06/2021 Paid $2,500 on the open account relating to previous credit purchase28/06/2021 Paid wages of $4,50030/06/2021 Paid $500 for utilities usedBased on the cash transactions above, complete the cash ledger using a three column format.Note: You need to select [-] if no amount is required to enter.Cash at Bank Date Description Debit Credit Balance01/06/2021 brought down $001/06/2021 07/06/2021 12/06/2021 15/06/2021 20/06/2021 23/06/2021 24/06/2021 27/06/2021 28/06/2021 30/06/2021
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