Wildhorse Store is located in midtown Madison. During the past several years, net income has been declining because of suburban shopping centers. At the end of the company’s fiscal year on November 30, 2020, the following accounts appeared in two of its trial balances. Prepare an owner's equity statement and balance sheet based on this trial balances: Unadjusted Adjusted Unadjusted Adjusted Accounts Payable $25,400 $25,400 Notes payable $35,000 $35,000 Accounts Receivable 31,000 31,000 Owner’s Capital 87,400 87,400 Accumulated Depr.—Equipment 35,000 46,000 Owner’s Drawings 10,000 10,000 Cash 25,000 25,000 Prepaid Insurance 10,200 2,500 Cost of Goods Sold 508,000 508,000 Property Tax Expense 2,500 Freight-Out 5,700 5,700 Property Taxes Payable 2,500 Equipment 145,000 145,000 Rent Expense 15,000 15,000 Depreciation Expense 11,000 Salaries and Wages Expense 96,000 96,000 Insurance Expense 7,700 Sales Revenue 720,000 720,000 Interest Expense 6,000 6,000 Sales Commissions Expense 6,500 11,000 Interest Revenue 2,100 2,100 Sales Commissions Payable 4,500 Inventory 30,000 30,000 Sales Returns and Allowances 8,000 8,000 Utilities Expense 8,500 8,500
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.
Wildhorse Store is located in midtown Madison. During the past several years, net income has been declining because of suburban shopping centers. At the end of the company’s fiscal year on November 30, 2020, the following accounts appeared in two of its
Prepare an owner's equity statement and
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Unadjusted
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Adjusted
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Unadjusted
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Adjusted
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| Accounts Payable | $25,400 | $25,400 | Notes payable | $35,000 | $35,000 | |||||
| 31,000 | 31,000 | Owner’s Capital | 87,400 | 87,400 | ||||||
| Accumulated Depr.—Equipment | 35,000 | 46,000 | Owner’s Drawings | 10,000 | 10,000 | |||||
| Cash | 25,000 | 25,000 | Prepaid Insurance | 10,200 | 2,500 | |||||
| Cost of Goods Sold | 508,000 | 508,000 | Property Tax Expense | 2,500 | ||||||
| Freight-Out | 5,700 | 5,700 | Property Taxes Payable | 2,500 | ||||||
| Equipment | 145,000 | 145,000 | Rent Expense | 15,000 | 15,000 | |||||
| 11,000 | Salaries and Wages Expense | 96,000 | 96,000 | |||||||
| Insurance Expense | 7,700 | Sales Revenue | 720,000 | 720,000 | ||||||
| Interest Expense | 6,000 | 6,000 | Sales Commissions Expense | 6,500 | 11,000 | |||||
| Interest Revenue | 2,100 | 2,100 | Sales Commissions Payable | 4,500 | ||||||
| Inventory | 30,000 | 30,000 | Sales Returns and Allowances | 8,000 | 8,000 | |||||
| Utilities Expense | 8,500 | 8,500 |
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