AB Ltd. presents the following selected accounts, all balances are after adjusting journal entries. All accounts have normal balances (accounts which are normally debits have debit balances here and visa-versa). Prepare a multi-step income statement. Advertising Expense CPP employee contributions El Employer Contributions Income Tax Withhold Inventory at beginning of the period Inventory at the end of the period Pension contribution Payable Pension contributions Expense Purchases Purchases Discounts Purchases Returns and Allowance Salary and Wages Expense Salary and Wages Payable Sales Sales Discounts Sales Returns and Allowances 1,300 120 50 1,000 17,000 20,200 315 150 10,839 550 370 8,500 530 30,830 1,100 930 Transportation In Transportation Out Worker's Compensation - Premiums Required 1: AB's Net Sales for the period must have been: $ Required 2: AB's Cost of Goods Available for Sale for the period must have been: $ Required 3: AB's Cost of Goods Sold for the period must have been: $1 Required 4: AB's Gross Profit on Sales in dollars for the period must have been: $ Required 5: AB's total Operating Expenses (not including COGS) for the period must have been: $ Required 6: AB's Net Income (loss) in dollars for the period must have been: $ 300 400 10,839
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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