Financial statementsThe assets and liabilities of Global Travel Agency on December 31, 20Y5. and its revenue and expenses for the year are as follows: Accounts payable $ 108,000 Accounts receivable 539,000 Cash 200,00 Common stock 575,000 Fees earned 940,000 940,000 Land 1,500,000 Miscellaneous expense $ 19,500 Rent expense 56,000 Supplies 6,000 Supplies expense 12,700 Utilities expense 34,800 Wages expense 415,000 Common stock was $525,000 and retained earnings was $1,250,000 as of January 1. 20Y5.During the year, additional common stock of $50,000 was issued for cash, and dividends of $90,000 were paid.Instructions1. Prepare an income statement for the year ended December 31. 20Y5.2. Prepare a statement of stockholders’ equity for the year ended December 31. 20Y5.3. Prepare a balance sheet as of December 31, 20Y5.4. What items appears on both the statement of stockholders’ equity and the 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.
Financial statements
The assets and liabilities of Global Travel Agency on December 31, 20Y5. and its revenue and expenses for the year are as follows:
| Accounts payable | $ 108,000 |
| Accounts receivable | 539,000 |
| Cash | 200,00 |
| Common stock | 575,000 |
|
Fees earned 940,000 |
940,000 |
| Land | 1,500,000 |
| Miscellaneous expense | $ 19,500 |
| Rent expense | 56,000 |
| Supplies | 6,000 |
| Supplies expense | 12,700 |
| Utilities expense | 34,800 |
| Wages expense | 415,000 |
Common stock was $525,000 and
During the year, additional common stock of $50,000 was issued for cash, and dividends of $90,000 were paid.
Instructions
1. Prepare an income statement for the year ended December 31. 20Y5.
2. Prepare a statement of
3. Prepare a balance sheet as of December 31, 20Y5.
4. What items appears on both the statement of stockholders’ equity and the balance sheet?
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