nce sheets for Providence lechnology Company and Smashing Technology Company on January 1, 2021 are as follows: Current Assets Plant and Equipment (net) Total Assets Total Liabilities Common Stock. 10 par value Other Contributed Capital Retained Earnings Total Equities Providence Technology 440,000 1,080,000 1.520.000 230,000 840,000 300,000 150,000 1,520,000 Smashing Technology 200,000 340,000 540,000 80,000 240,000 130,000 90,000 540,000 On January 1, 2021 the stockholders of Providence Technology and Smashing Technology agreed to a consolidation whereby a new corporation. Cannon Company, would be formed to consolidate Providence Technology and Smashing Technology. Cannon Company issued 70.000 shares of its 20 par value common stock for the net assets of Providence Technology and Smashing Technology. On the date of consolidation, the fair values of Providence Technology's and Smashing Technology's current assets and liabilities were equal to their book values. The fair value of plant and equipment for each company was: Providence Technology, 1,270,000; Smashing Technology. 360,000. An investment banking house estimated that the fair value of Cannon Company's common stock was 35 per share. Providence Technology will incur 45,000 of direct acquisition costs and 15,000 in stock issue costs.
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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