The following information is for Bonnie's Buds, a nursery and floral shop, for the month ende May 31, 2012: Accounts Payable Accounts Receivable Accum. Depreciation-Store Equipment $135,000 Prepaid Insurance 111,460 Purchases 152,250 Purchases Discount Rent Expense-General $ 24,000 419,000 54,325 4,500 Advertising Expense Cash Common Stock Depreciation Expense Dividends Insurance Expense-General Insurance Expense-Selling Merchandise Inventory, beginning Merchandise Inventory, ending 155,000 Store Supplies 16,500 Rent Expense-Selling 26,790 Retained Earnings, beginning 100,000 Salaries Expense-General 9,000 Salaries Expense-Selling 144,000 Salaries Payable 900 Sales 8,100 Sales Discount 117,000 Store Equipment 15,000 339,505 18,000 96,000 12,300 760,000 48,000 375,000 5,880
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.
Prepare Statement of Retained Earnings
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