HP Entity's current reporting date is 31 December 2014. On 1 December 2014 the following balances, among others, appeared in the records of HP Entity: Note Bank Payable KK Payable TT Loan - LTL Motors Sales Cost of sales Repairs Water and electricity Insurance Bad debts Bank charges Rent income VAT Input VAT Output Machinery - cost price (useful life 5 years) Accumulated depreciation - Machinery (1 Jan 2014) Fixed term deposit Trading inventories Receivable A Receivable B Payable Jozi Drawings Retained earnings - 1 January 2014 Capital 4. 5. 6. 7. 1234567 8 9 5 23 сл 2 9 10 3 & 11 12 13 Dr 1 443 000 69 000 208 950 132 000 88 800 16 560 154 400 1 020 000 364 800 315 920 323 760 287 280 492 430 168 000 5 594 900 Cr 2 120 000 163 000 193 160 The following transactions/events still have to be recognised in the records of HP Entity: 1. Cash sale of trading inventories totalling R412 452 were made in December. The cost price of these inventories was R342 000. 2. Repairs were done by Payable KK and an invoice of R28 500 payable on or before 15 January 2015 was delivered. 3. Received statements from Payable Jozi for R20 520 in respect of the water- and electricity utilisation in December 2014. This amount is payable 30 days from statement date. 48 000 135 900 111 300 ? 23 940 489 600 1 800 000 5 594 900 The insurance premium of R17 100 for December was paid to the insurance company on 3 December by means of an electronic transfer of funds. The credit manager gave authorisation to write off Receivable B's debt as irrecoverable as he has been declared insolvent On 4 January 2015 the bank statement was received from the Bank. The statement indicated bank charges of R13 680 and interest charge of R10 260 for the month of December 2014. The interest charge relates to a bank overdraft experience during the early part December 2014. On 1 December HP Entity's entered into another sub-letting agreement for a portion of the entity's property to Hyatt for a period of 2 years. Lease payment of R21 660 for December,
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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