Ajman-Retail-Mart-Mart LLC completed the following merchandising transactions in the month of March 2024. At the beginning of March, the ledger of Ajman-Retail-Mart showed Cash of AED12,000 and Owner's Capital of AED450,000. The following are the transactions in March. Date Transactions March 2 Purchased merchandise on account from Wahid Supply AED6,200, terms 1/10, n/30. 4 Sold merchandise on account AED5,500, FOB destination, terms 1/10, n/30. The cost of the merchandise sold was AED3,400. 5 Paid AED240 freight on April 4 sale. 6 11 Paid Wahid Supply in full, less discount. 13 Received credit from Wahid Supply for merchandise returned AED500. Received collections in full, less discounts, from customers billed on April 4. 14. Purchased merchandise for cash AED3,800. Received refund from supplier for returned goods on cash purchase of April 14, AED500. 16 18 Purchased merchandise from Bayan LLC AED4,500, FOB shipping point, terms 2/10, n/30. 20 Paid freight on April 18 purchase AED160. 23 26 222222 27 29 Sold merchandise for cash AED7,400. The merchandise sold had a cost of AED4,120. Purchased merchandise for cash AED2,300. Paid Bayan LLC in full, less discount. Made refunds to cash customers for defective merchandise AED90. The returned merchandise had a fair value of AED30. 30 Sold merchandise on account AED3,400, terms n/30. The cost of the merchandise sold was AED1,900. REQUIRED: a. Journalize the transactions using a perpetual inventory system. b. Post the journal transactions to ledger for the following accounts: i. Sales Revenue ii. Cost of Gods Sold c. Prepare the income statement through gross profit for the month of April 2024.
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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