(a) (b) c) (d) (e) The following list of balances was taken from the books of Orange Traders, a fruit and vegetable distributor as at 28 FEBRUARY 2021, the end of the financial year: Capital Drawings Loan: NRB Additional Information: (f) Inventory: 1 March 2020 Provision for bad debts Sales Purchases Sales returns Purchases returns Rent income Salaries and wages Railage on sales Interest on loan Packing material Discount received Bad debts Stationery Insurance Printing Railage on purchases 60 500 3 400 70 000 13 760 150 250 620 116 040 250 1 150 10 500 77 500 1 600 6 300 3 600 400 300 5 400 660 1 350 2 500 Inventory on hand at 28 February 2021 amounts to R 15 350. Depreciation must be provided as follows: Vehicles R 3400 Equipment R 560 The loan was granted on 1 March 2019 at 12% p.a., payable every three months. Interest for the period 1 December 2020 to 28 February 2021 is payable on 1 March 2021. A store room was sublet from 1 June 2020 at R 1 050 per month. An amount of R120 was paid to Vesta Insurers as an advance premium for March 2021. An account of R1 350 was received from Prints Printers for the printing of documents. This must still be recorded.
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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