The following are the transactions of Taki traders for the month of June 2020: June 01: The business owner paid €40,000 into the business account. June 01: Bought goods for resale €7,000 paying by cheque. June 01: Bought a vehicle for €15,000 paying by cheque. June 02: Paid rent €3,000 paying by cheque. June 03: Paid insurance €2,200 paying by cheque. June 04: Bought goods for resale €6,000 paying by cheque. June 05: Sold goods for €4,500 and immediately banked the cheque. June 06: Paid wages €2,400 paying by cheque. June 07: Bought goods for resale €8,000 paying by cheque. June 08: Sold goods for €6,500 immediately banking the cheque. June 20: Paid business rates €3,900, paying by cheque. June 30: Sold goods for €2,000, immediately banking the cheque. Required (a) Write up the above transactions in the appropriate ledger accounts and balance them off. (b) Ledgers help to organize accounting information into categories normally known as ‘’classes’’. With examples explain the nature and differences between revenue and capital ledgers (c) Using two revenue and capital ledgers, explain how you will treat them in the trial balance (d) Explain the treatment of the proprietor’s additional contribution to an already existing business. In addition, explain the underlying accounting principle you will apply in answering this question (b) Prepare a trial balance as at the close of business on June 30th
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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