Using the following information, prepare the adjusting entries in general journal form for the Tia Company as of December 31st, 2000. The Tia Company adjusts its books annually on December 31st. Followings are some of the accounts which appeared in the trial balance on December 31st, 2000, before adjusting entries were made: $ 75,000 Building Accumulated depreciation- building Office supplies on hand Prepaid advertising Prepaid insurance Utilities expense Prepaid rent Advertising expense Sales Unearned revenue $ 12,500 445 960 1,600 60 900 1,080 20,400 450 The following additional information is available: 1. The building was purchased for $ 75,000. It has an estimated useful life of 15 years with no salvage value. Straight-line depreciation is used. 2. Office supplies on hand amount to $ 140. 3. The Tia Company purchased a 4-year fire insurance policy on July1, 2000, paying the full 4-year premium of $ 1,600 in advance. The Tia Company rented a warehouse on October 1, 2000, at a monthly rental of $ 300 , paying 3 months rent in advance. 5. On December 1, 2000, the Tia Company purchased advertising in the Jakarta News for 3 months for S 960, paying the space in advance. 6. Since the last pay day, employees have earned an additional $ 600. 7. Two-thirds of the unearned revenue have been earned by December 31, 2000. 4.
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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