Item Financial Statement Element for Account to be Debited Financial Statement Element for Account to be Credited A cash dividend is declared and paid to shareholders. Equity Current Assets A bill for electricity used in the current month is received but not payable until the following month. Answer 1 Question 1 Current Assets Income – Gains Non-current Liabilities Income – Revenue Non-current Assets Expenses – Loss Current Liabilities Expenses Equity Answer 2 Question 1 Income – Gains Current Assets Expenses – Loss Non-current Assets Non-current Liabilities Equity Current Liabilities Expenses Income – Revenue Products are sold to customers on 30-days’ credit Answer 3 Question 1 Non-current Assets Expenses – Loss Equity Current Assets Income – Gains Income – Revenue Non-current Liabilities Current Liabilities Expenses Answer 4 Question 1 Expenses – Loss Expenses Income – Revenue Non-current Liabilities Equity Income – Gains Non-current Assets Current Liabilities Current Assets A customer makes a deposit on a special order that will not be manufactured until next year. Answer 5 Question 1 Expenses – Loss Income – Gains Non-current Assets Income – Revenue Non-current Liabilities Current Liabilities Current Assets Expenses Equity Answer 6 Question 1 Current Assets Equity Non-current Liabilities Income – Gains Current Liabilities Income – Revenue Non-current Assets Expenses Expenses – Loss Cash dividends declared but not yet paid. Answer 7 Question 1 Non-current Liabilities Current Liabilities Income – Revenue Equity Income – Gains Non-current Assets Current Assets Expenses – Loss Expenses Answer 8 Question 1 Current Assets Expenses – Loss Expenses Non-current Liabilities Income – Gains Current Liabilities Equity Income – Revenue Non-current Assets A shareholder invests money in a business by making a loan with commercial terms to the business. Answer 9 Question 1 Income – Revenue Expenses Current Liabilities Non-current Assets Current Assets Income – Gains Non-current Liabilities Equity Expenses – Loss
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.
|
Item |
Financial Statement Element for Account to be Debited |
Financial Statement Element for Account to be Credited |
|
A cash dividend is declared and paid to shareholders. |
Equity |
Current Assets |
|
A bill for electricity used in the current month is received but not payable until the following month. |
Answer 1 Question 1 Current Assets Income – Gains Non-current Liabilities Income – Revenue Non-current Assets Expenses – Loss Current Liabilities Expenses Equity
|
Answer 2 Question 1 Income – Gains Current Assets Expenses – Loss Non-current Assets Non-current Liabilities Equity Current Liabilities Expenses Income – Revenue
|
|
Products are sold to customers on 30-days’ credit |
Answer 3 Question 1 Non-current Assets Expenses – Loss Equity Current Assets Income – Gains Income – Revenue Non-current Liabilities Current Liabilities Expenses |
Answer 4 Question 1 Expenses – Loss Expenses Income – Revenue Non-current Liabilities Equity Income – Gains Non-current Assets Current Liabilities Current Assets |
|
A customer makes a deposit on a special order that will not be manufactured until next year. |
Answer 5 Question 1 Expenses – Loss Income – Gains Non-current Assets Income – Revenue Non-current Liabilities Current Liabilities Current Assets Expenses Equity |
Answer 6 Question 1 Current Assets Equity Non-current Liabilities Income – Gains Current Liabilities Income – Revenue Non-current Assets Expenses Expenses – Loss
|
|
Cash dividends declared but not yet paid. |
Answer 7 Question 1 Non-current Liabilities Current Liabilities Income – Revenue Equity Income – Gains Non-current Assets Current Assets Expenses – Loss Expenses
|
Answer 8 Question 1 Current Assets Expenses – Loss Expenses Non-current Liabilities Income – Gains Current Liabilities Equity Income – Revenue Non-current Assets
|
|
A shareholder invests money in a business by making a loan with commercial terms to the business. |
Answer 9 Question 1 Income – Revenue Expenses Current Liabilities Non-current Assets Current Assets Income – Gains Non-current Liabilities Equity Expenses – Loss |
Step by step
Solved in 3 steps
