Jules Jewels, a wholesaler of designer jewellery, has provided you with the following information for the year ended 31 December 2021. Account $ Advertising expense 18,400 Accounts Payable 30,000 Inventory 70,000 Cost of sales 174,000 Drawings 18,400 Depreciation expense – Showroom fixtures & fittings 3,200 Depreciation expense – Delivery vehicle 2,800 Rent expense (70% showroom and 30% office) 16,000 Showroom fixtures and fittings 90,000 Interest expense 400 Insurance expense (80% showroom and 20% office) 3,200 Wages expense (80% showroom and 20% office) 64,000 Utilities expense (50% showroom and 50% office) 26,800 Accumulated depreciation – Showroom Fixtures & Fittings 15,000 Capital J.Perera 152, 800 Cash at bank 160,000 Accumulated depreciation – Delivery vehicle 10,000 Sales revenue 360,500 Delivery vehicle 73,900 Prepaid rent 8,000 GST Collected 41,500 GST Paid 26,200 Additional Information: Advertising incurred, but not recorded at balance date is $250. Required: From the above information, prepare a fully classified Income Statement for the year ending 31 December 2021.
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.
Jules Jewels, a wholesaler of designer jewellery, has provided you with the following information for the year ended 31 December 2021.
|
Account |
$ |
|
Advertising expense |
18,400 |
|
Accounts Payable |
30,000 |
|
Inventory |
70,000 |
|
Cost of sales |
174,000 |
|
Drawings |
18,400 |
|
Depreciation expense – Showroom fixtures & fittings |
3,200 |
|
Depreciation expense – Delivery vehicle |
2,800 |
|
Rent expense (70% showroom and 30% office) |
16,000 |
|
Showroom fixtures and fittings |
90,000 |
|
Interest expense |
400 |
|
Insurance expense (80% showroom and 20% office) |
3,200 |
|
Wages expense (80% showroom and 20% office) |
64,000 |
|
Utilities expense (50% showroom and 50% office) |
26,800 |
|
|
15,000 |
|
Capital J.Perera |
152, 800 |
|
Cash at bank |
160,000 |
|
Accumulated depreciation – Delivery vehicle |
10,000 |
|
Sales revenue |
360,500 |
|
Delivery vehicle |
73,900 |
|
Prepaid rent |
8,000 |
|
GST Collected |
41,500 |
|
GST Paid |
26,200 |
Additional Information:
Advertising incurred, but not recorded at balance date is $250.
Required:
From the above information, prepare a fully classified Income Statement for the year ending 31 December 2021.
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