Use direct method Comparative Balance Sheets Current assets Cash at Bank Accounts Receivable Less: Allowance for doubtful debts Inventory - Javas Ultra02 Systems Total Current Assets Non-current Assets Property, Plant & Equipment Accumulated Depreciation - PPE Investment in Spy Toys Ltd Total Non-current Assets Total Assets Current Liabilities Accounts Payable Accrued Expenses Income Tax Payable Total Current Liabilities Total Liabilities Net Assets Equity Share Capital Retained Profits General Reserve Revaluation Surplus Total Equity Comparative Income Statement Income Sales Javas Sales - Installation Sales - Software and data Total Income Cost of Sales Cost of Sales-Javas Ultra 02 System Gross Profit Expenses Loss on sale of PPE Bad debts expense Other expenses Depreciation Expense-PPE Income Tax Expense Total Expenses Net Profit The following additional information relating to 2021 is provided: All sales of inventory, provision of installation, and provision of services were on credit, and all purchases of inventory were made using credit. Property Plant and Equipment was sold during 2021 for $51,000 cash. An additional investment in Spy Toys Ltd was made, with shares purchased on the ASX at a market value of $18,000. A bonus share issue of $10,000 was declared and provided to shareholders out of the Revaluation Surplus. No assets were revalued during the year Prepare a Cash Flow Statement for the financial year ending 31 December 2021 using the Direct Method. 31-Dec 2021 $000 $000 1,02,000 1,60,000 -15,000 1,52,000 3,99,000 1,32,000 -32,000 38,000 1,38,000 5,37,000 1,36,000 56,000 1,000 1,93,000 1,93,000 3,44,000 1,38,000 1,89,000 13,000 4,000 3,44,000 2021 3,27,760 35,200 38,700 4,01,660 3,05,800 95,860 12,000 19,500 56,000 4,000 700 -92,200 3,660 31-Dec 2020 $000 $000 1,07,000 1,59,000 -24,000 1,52,000 3,94,000 1,45,000 -46,000 20,000 1,19,000 5,13,000 1,75,000 19,000 8,000 2,02,000 2,02,000 3,11,000 91,000 1,93,000 13,000 14000 3,11,000 2020 2,96,250 18,450 28,725 3,43,425 2,52,520 90,905 0 10,000 48,000 3,000 8,000 -69,000 21,905
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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