The general ledger of Zips Storage at January 1, 2021, includes the following account balances: Accounts Debits Credits Cash $ 26,600 Accounts Receivable 17,400 Prepaid Insurance 16,000 Land 168,000 Accounts Payable $ 8,700 Deferred Revenue 7,800 Common Stock 163,000 Retained Earnings 48,500 Totals $ 228,000 $ 228,000 The following is a summary of the transactions for the year: 1. January 9 Provide storage services for cash, $154,100, and on account, $62,200. 2. February 12 Collect on accounts receivable, $53,500. 3. April 25 Receive cash in advance from customers, $14,900. 4. May 6 Purchase supplies on account, $13,200. 5. July 15 Pay property taxes, $10,500. 6. September 10 Pay on accounts payable, $13,400. 7. October 31 Pay salaries, $143,600. 8. November 20 Issue shares of common stock in exchange for $47,000 cash. 9. December 30 Pay $4,800 cash dividends to stockholders.
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 general ledger of Zips Storage at January 1, 2021, includes the following account balances:
Accounts | Debits | Credits | |||||
Cash | $ | 26,600 | |||||
17,400 | |||||||
Prepaid Insurance | 16,000 | ||||||
Land | 168,000 | ||||||
Accounts Payable | $ | 8,700 | |||||
Deferred Revenue | 7,800 | ||||||
Common Stock | 163,000 | ||||||
48,500 | |||||||
Totals | $ | 228,000 | $ | 228,000 | |||
The following is a summary of the transactions for the year:
1. | January | 9 | Provide storage services for cash, $154,100, and on account, $62,200. | |||
2. | February | 12 | Collect on accounts receivable, $53,500. | |||
3. | April | 25 | Receive cash in advance from customers, $14,900. | |||
4. | May | 6 | Purchase supplies on account, $13,200. | |||
5. | July | 15 | Pay property taxes, $10,500. | |||
6. | September | 10 | Pay on accounts payable, $13,400. | |||
7. | October | 31 | Pay salaries, $143,600. | |||
8. | November | 20 | Issue shares of common stock in exchange for $47,000 cash. | |||
9. | December | 30 | Pay $4,800 cash dividends to stockholders. |
Insurance expired during the year is $9,000. Supplies remaining on hand at the end of the year equal $4,900. Provide services of $13,800 related to cash paid in advance by customers.
Record the closing entry for revenue, expense, and cash dividend.
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