1,200,000 Direct expenses 4,000,000 Bills payable 150,000 Net sales 80,000,000 Office furniture and fittings 4,500,000 Accumulated depreciation on furniture & fittings 900,000 Return outwards of direct
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.
The following
Trial Balance
Details/Accounts Dr $ Cr $
Insurance 1,200,000
Direct expenses 4,000,000
Bills payable 150,000
Net sales 80,000,000
Office furniture and fittings 4,500,000
Accumulated depreciation on furniture & fittings 900,000
Return outwards of direct raw materials 330,000
Rent 3,000,000 500,000
Bank overdraft 550,000
Direct raw materials purchased 20,330,000
Indirect factory wages 4,000,000
Stock of direct raw materials January 1, 2010 6,500,000
Stationery 1,100,000
Provision for unrealized profit 600,000
Capital 28,940,000
Provision for bad and doubtful debts 400,000
Production workers salaries 12,000,000
Cash in hand 1,500,000
Accounts payable 5,600,000
Electricity 2,400,000
Commission 4,800,000 1,000,000
Stock of finished goods January 1, 2010 6,600,000
Discounts 800,000 750,000
Carriage inwards of direct raw materials 1,600,000
Administrative salaries 8,400,000
Accounts receivable 9,000,000
Motor vehicles 20,000,000
Provision for depreciation on motor vehicles 8,000,000
Work in progress, January 1, 2010 3,500,000
Bills receivable 420,000
Plant and machinery 15,000,000
Accumulated depreciation on plant and machinery 6,000,000
Motor vehicles repair cost 700,000
Cash drawings 2,000,000
133,720,000 133,720,000
Notes:
(i) Depreciation is to be charged as follows: motor vehicles 20% reducing balance; office furniture and fittings 10% straight line; and plant and machinery 10% reducing balance.
(ii) Insurance amounting to $120,000 was unpaid as at December 31, 2010.
(iii) Motor vehicle expenses are to be apportioned 3:2 between factory and office respectively.
(iv) The company adds 10% factory profit to its cost of production.
(v) Rent expense is to be apportioned 3:1 between factory and office respectively; 60% of the insurance relates to the factory; and ¾ of the electricity usage relates to the factory.
(vi) Commission revenue amounting to $150,000 was due to the company as at December 31, 2010.
(vii) The provision for bad and doubtful debts is to be adjusted to 1½ % of debtors.
(viii) Indirect factory wages accrued as at December 31, 2010 amounted to $180,000.
(ix) Stocks as at December 31, 2010 were as follows: Work in progress $4,900,000; Finished goods, $7,700,000 and direct raw materials, $5,000,000.
Required:
(a) Prepare Manufacturing, Trading and
(b) A Balance Sheet as at December 31, 2010.
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