The following is a list of balances relating to Phiri Properties Ltd during 2010. The company maintains a memorandum debtors and creditors ledger in which the individual account of customers and suppliers are maintained. These were as follows: $ Debit balance in debtors account 01/01/10 66,300 Credit balance in creditors account 01/01/10 50,600 Sunday credit balance on debtors ledger 724 Goods purchased on credit 257,919 Goods sold on credit 323,614 Cash received from debtors 299,149 Cash paid to suppliers 210,522 Discount received 2,663 Discount allowed 2,930 Cash purchases 3,627 Cash sales 5,922 Bad Debts written off 3,651 Interest on overdue account of customers 277 Returns outwards 2,926 Return inwards 2,805 Accounts settled by contra between debtors and creditors ledgers 1,106 Credit balances in debtors ledgers 31/12/10 815 Debit balances in creditors ledger 31/12/10 698 Required: a) Prepare the debtors control account as at 31/12/10. b) Prepare the creditors control account as at 31/12/10
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.
Question 1
The following is a list of balances relating to Phiri Properties Ltd during 2010. The company maintains a memorandum debtors and creditors ledger in which the individual account of customers and suppliers are maintained.
These were as follows:
$
Debit balance in debtors account 01/01/10 66,300
Credit balance in creditors account 01/01/10 50,600
Sunday credit balance on debtors ledger 724
Goods purchased on credit 257,919
Goods sold on credit 323,614
Cash received from debtors 299,149
Cash paid to suppliers 210,522
Discount received 2,663
Discount allowed 2,930
Cash purchases 3,627
Cash sales 5,922
Interest on overdue account of customers 277
Returns outwards 2,926
Return inwards 2,805
Accounts settled by contra between debtors and creditors ledgers 1,106
Credit balances in debtors ledgers 31/12/10 815
Debit balances in creditors ledger 31/12/10 698
Required:
a) Prepare the debtors control account as at 31/12/10.
b) Prepare the creditors control account as at 31/12/10
Step by step
Solved in 2 steps with 2 images
