Use the following information for exercise 15 to 18 LO P2 (The following information apples to the questions displayed below) On October 1. Ebony Emst organized Enst Consuting: on October 3, the owner contributed $83.01O in assets to launch the business. On October 31, the company's records show the following items and amounts. Cash Accounts recelvable office spplles Land office eipnent Accounts payable Ouner investnents $14,80 Cash wdthdraals by ouner 12,120 Consulting revenue 2,2 Rent epense 45, e Salarles epense 26, Telephone expense 7,4 Miscellaneous expensg 930 12,120 2,50 Exercise 1-17 Preparing a balance sheet LO P2 Using the above information prepare an October 31 balance sheet for Ernst Consulting. ERNST CONSULTING Balance Sheet
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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Use the following information for exercise 15 to 18 LO P2
[The following information applies to the questions displayed below.]
On October 1, Ebony Ernst organized Ernst Consulting: on October 3, the owner contributed $83,010 in assets to launch
the business. On October 31, the company's records show the following items and amounts.
$14,890 Cash withdravals by owner
12,820 Consulting revenue
2,290 Rent expense
45,960 Salaries expense
16,900 Telephone expense
7,670 Hiscellaneous expense
83,010
$ 930
12,820
2,530
5,780
Cash
Accounts receivable
Office supplies
Land
office equipnent
Accounts payable
Owner investments
790
610
Exercise 1-17 Preparing a balance sheet LO P2
Using the above information prepare an October 31 balance sheet for Ernst Consulting.
ERNST CONSULTING
Balance Sheet
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