2,000,000 365,000 1,555,000 15,000 120,000 22,000 325,000 18,000 Sales Inventory, January 1 Purchases Purchases returns and allowances Salaries Delivery expenses Retained earnings, January 1 Dividend income Gain on sale of fixed asset Light and power Travel and transportation Interest and bank charges Miscellaneous operating expenses Bad debts written off Depreciation Income tax 7,000 80,000 18,000 35,000 6,000 4,000 15,000 39,950 Dividends declared and paid Inventory, December 31 85,000 325,000
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 an income statement base on the data given below
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Sales
Inventory, January 1
Purchases
Purchases returns and allowances
2,000,000
365,000
1,555,000
15,000
120,000
22,000
325,000
18,000
Salaries
Delivery expenses
Retained earnings, January 1
Dividend income
Gain on sale of fixed asset
Light and power
Travel and transportation
Interest and bank charges
Miscellaneous operating expenses
Bad debts written off
7,000
80,000
18,000
35,000
6,000
4,000
15,000
Depreciation
Income tax
39,950
Dividends declared and paid
Inventory, December 31
85,000
325,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F885ad90d-6d2c-42ea-aad9-92aa311301e6%2F1bd84900-8b70-4596-8b35-2c42e29219d2%2Fo5t2oua_processed.jpeg&w=3840&q=75)
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