Transactions during 2020 follow: a.Borrowed $20,000 cash on July 1, 2020, signing a one-year, 10 percent note payable. b.Purchased equipment for $18,000 cash on July 1, 2020. c.Sold 10,000 additional shares of capital stock for cash at $0.50 market value per share at the beginning of the year. d.Earned $70,000 in revenues for 2020, including $14,000 on credit and the rest in cash. e.Incurred $27,000 in wages expense and $8,000 in miscellaneous expenses for 2020, with $7,000 on credit and the rest paid with cash. Note: Wages are paid in cash. f.Purchased additional small tools, $3,000 cash. g.Collected accounts receivable, $8,000. h.Paid accounts payable, $11,000. i. Purchased $10,000 of supplies on account. j.Received a $3,000 deposit on work to start January 15, 2021. k.Declared a cash dividend on December 1, $10,000; paid on December 31. Data for adjusting entries: l.Supplies of $4,000 and small tools of $8,000 were counted on December 31, 2020 (debit Miscellaneous Expenses). m.Depreciation for 2020, $2,000. n.Interest accrued on notes payable (to be computed). o.Wages earned since the December 24 payroll but not yet paid, $3,000. p.Income tax expense was $4,000, payable in 2021. REQUIRED: Post the journal entries for transactions (a) through (k) and adjusting entries for transactions (l) through (p) to the respective T-Accounts. Cash Accounts Receivable Beg. bal. Beg. bal. End. bal. 0 End. bal. 0 Supplies Small Tools Beg. bal. Beg. bal. End. bal. 0 End. bal. 0 Equipment Accumulated Depreciation Beg. bal. Beg. bal. End. bal. 0 End. bal. 0 Other Assets Accounts Payable Beg. bal. Beg. bal. End. bal. 0 End. bal. 0 Notes Payable Dividends Payable Beg. bal. Beg. bal. End. bal. 0 End. bal. 0 Wages Payable Interest Payable Beg. bal. Beg. bal. End. bal. 0 End. bal. 0 Income Taxes Payable Unearned Revenue Beg. bal. Beg. bal. End. bal. 0 End. bal. 0 Common Stock Additional Paid-in Capital Beg. bal. Beg. bal. End. bal. 0 End. bal. 0 Retained Earnings Service Revenue Beg. bal. Beg. bal. End. bal. 0 End. bal. 0 Income Tax Expense Interest Expense Beg. bal. Beg. bal. End. bal. 0 End. bal. 0 Depreciation Expense Wages Expense Beg. bal. Beg. bal. End. bal. 0 End. bal. 0 Miscellaneous expenses Beg. bal. End. bal. 0
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.
Transactions during 2020 follow: a.Borrowed $20,000 cash on July 1, 2020, signing a one-year, 10 percent note payable. b.Purchased equipment for $18,000 cash on July 1, 2020. c.Sold 10,000 additional shares of capital stock for cash at $0.50 market value per share at the beginning of the year. d.Earned $70,000 in revenues for 2020, including $14,000 on credit and the rest in cash. e.Incurred $27,000 in wages expense and $8,000 in miscellaneous expenses for 2020, with $7,000 on credit and the rest paid with cash. Note: Wages are paid in cash. f.Purchased additional small tools, $3,000 cash. g.Collected
REQUIRED:
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Cash |
Accounts Receivable |
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| Beg. bal. | Beg. bal. | |||||||
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0 |
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0 |
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Supplies |
Small Tools |
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| End. bal. |
0 |
End. bal. |
0 |
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Equipment |
Accumulated Depreciation |
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Other Assets |
Accounts Payable |
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0 |
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Notes Payable |
Dividends Payable |
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| End. bal. |
0 |
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Wages Payable |
Interest Payable |
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| End. bal. |
0 |
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0 |
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Income Taxes Payable |
Unearned Revenue |
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| End. bal. |
0 |
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Common Stock |
Additional Paid-in Capital |
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| End. bal. |
0 |
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Service Revenue |
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Income Tax Expense |
Interest Expense |
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| Beg. bal. | Beg. bal. | |||||||
| End. bal. |
0 |
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Depreciation Expense |
Wages Expense |
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| Beg. bal. | Beg. bal. | |||||||
| End. bal. |
0 |
End. bal. |
0 |
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Miscellaneous expenses |
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| End. bal. |
0 |
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