MAHA COMPANY Worksheet (partial) for the year ended December 31, 2018 Account Title Adjusted Trial Balance Income Statement Balance Sheet Debit Credit Debit Credit Debit Credit Cash 2,550 2,550 Accounts Receivables 2,040 2,040 Supplies 1,350 1,350 Prepaid Insurance 950 950 Machinery 42,500 42,500 Notes Payable 15,600 15,600 Accounts Payable 3,470 3,470 Capital 27,900 27,900 Drawings 800 800 Service Revenue 7,100 7,100 Salaries Expenses 1,780 1,780 Miscellaneous Expenses 2,100 2,100 Net income 3,220 3,220 54,070 54,070 7,100 7,100 50,190 50,190 Instruction Journalize the closing entries at December 31, 2018 Post the closing entries to “Income Summary” and “Capital” by using “T” accounts
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.
- The worksheet of the MAHA Company as follows.
MAHA COMPANY
Worksheet (partial) for the year ended December 31, 2018
|
Account Title |
Adjusted |
Income Statement |
|
|||
|
Debit |
Credit |
Debit |
Credit |
Debit |
Credit |
|
|
Cash |
2,550 |
|
|
|
2,550 |
|
|
|
2,040 |
|
|
|
2,040 |
|
|
Supplies |
1,350 |
|
|
|
1,350 |
|
|
Prepaid Insurance |
950 |
|
|
|
950 |
|
|
Machinery |
42,500 |
|
|
|
42,500 |
|
|
Notes Payable |
|
15,600 |
|
|
|
15,600 |
|
Accounts Payable |
|
3,470 |
|
|
|
3,470 |
|
Capital |
|
27,900 |
|
|
|
27,900 |
|
Drawings |
800 |
|
|
|
800 |
|
|
Service Revenue |
|
7,100 |
|
7,100 |
|
|
|
Salaries Expenses |
1,780 |
|
1,780 |
|
|
|
|
Miscellaneous Expenses |
2,100 |
|
2,100 |
|
|
|
|
Net income |
|
|
3,220 |
|
|
3,220 |
|
|
54,070 |
54,070 |
7,100 |
7,100 |
50,190 |
50,190 |
Instruction
- Journalize the closing entries at December 31, 2018
Post the closing entries to “Income Summary” and “Capital” by using “T” accounts
(a)
|
Date |
Account |
Ref. |
Debit |
Credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b). “T” Accounts Income Summary |
|
Capital |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Step by step
Solved in 3 steps with 2 images
