Use the trial balance, adjustments and additional information to prepare the Statement of Comprehensive Income for the year ended 28 February 2022. Liat Traders PRE-ADJUSTMENT TRIAL BALANCE AS AT 28 FEBRUARY 2022 Balance sheet accounts section Debit Credit
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.
Use the
Comprehensive Income for the year ended 28 February 2022.
Liat Traders
PRE-ADJUSTMENT TRIAL BALANCE AS AT 28 FEBRUARY 2022
Balance sheet accounts section Debit Credit
R R
Capital 550 854
Drawings 75 150
Land and buildings 477 164
Vehicles at cost 91 000
Equipment at cost 67 000
Accumulated
Accumulated depreciation on
equipment 23800
Trading inventory 68 800
Debtors control 45 850
Provision for
Bank 15 560
Cash float 1 250
Petty cash 250
Creditors control 38 860
Loan: MUFG Bank (15%) 21600
Nominal accounts section
Sales 498 000
Cost of sales 244 000
Sales returns 8 000
Wages 42 500
Bank charges 2 300
Rent income 26000
Packing materials 12 000
Advertising 8 500
Rates 3 000
Bad debts 900
Discount allowed 750
Discount received 980
Stationery 8 500
Interest on loan 2 970
Water and electricity 5 550
Insurance 5 000
Telephone 7 000
1 192 994 1 192 994
Adjustments and additional information
1. A physical count revealed the following inventories on hand on 28 February 2022:
Trading inventory: R 66 800
Packing materials: R 4 000
2. Received an account from Minty’s Tyres for replacing the tyres on the motor vehicle,
R6 500. No entry has been made for this.
3. The account of debtor, L. Azizalahoff, who owed R5 000 must be written off as
irrecoverable.
4. A debtor whose account of R2 400 was overdue for one month must be charged
interest at a rate of 12% per annum.
5. The provision for bad debts must be reduced to R1 550.
6. The interest on loan for February 2022 has not yet been paid.
7. The telephone account for February 2022 will only be paid on 03 March 2022, R1 000.
8. The insurance account includes the annual building insurance premium that was paid
for the period 01 September 2021 to 31 August 2022, R1 800.
9. The bookkeeper did not record an amount of R500 that was reflected on the bank
statement for service fees.
10. Rent has been received in advance for one month.
11. Provide for depreciation as follows:
11.1 On equipment at 10% per annum on cost. Note: Equipment with a cost price of R20
000 was purchased on 01 June 2021. The purchase has been recorded.
11.2 On vehicles at 20% per annum on the diminishing balance.
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