The following information are extracted from the books and records of Pinoy Company and its branch. The balances are at December 31, 2020, the fourth year of the company’s operations. Home Office Books Branch Books Sales 200,000 Shipments to branch 60,000 Shipments from home office 80,000 Purchases 30,000 Expenses 60,000 Inventory, Jan. 1 20,000 Allowance for overvaluation of branch inventory 24,000 There are no shipments in transit between the home office and the branch. Both shipments accounts are properly recorded. The ending inventory at billed price includes merchandise acquired from the home office in the amount of P20,000 and P6,000 acquired from vendors for a total of P26,000. 1. How much was acquired from outsiders?
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 following information are extracted from the books and records of Pinoy Company and its
branch. The balances are at December 31, 2020, the fourth year of the company’s operations.
Home Office Books Branch Books
Sales 200,000
Shipments to branch 60,000
Shipments from home office 80,000
Purchases 30,000
Expenses 60,000
Inventory, Jan. 1 20,000
Allowance for overvaluation of branch inventory 24,000
There are no shipments in transit between the home office and the branch. Both shipments
accounts are properly recorded. The ending inventory at billed price includes merchandise
acquired from the home office in the amount of P20,000 and P6,000 acquired from vendors
for a total of P26,000.
1. How much was acquired from outsiders?
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