Prepare a statement of financial position as at 31 December 2021 for Tonson Below is the list of nominal ledger balances of Tonson Plc at 31 December 2021. Tonson’s financial year end is at 31 December. Nominal ledger closing balances at 31 December 2021 The following information is relevant. 1. Closing inventory at 31 December 2021 is £45,000 On fu
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.
Question: Prepare a statement of financial position as at 31 December 2021 for Tonson
Below is the list of nominal ledger balances of Tonson Plc at 31 December 2021. Tonson’s financial year end is at 31 December.
Nominal ledger closing balances at 31 December 2021
The following information is relevant.
1. Closing inventory at 31 December 2021 is £45,000
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On further investigation of the suspense account in the
trial balance above, it was discovered that:An expense of £8,250 for legal services had been posted to the suspense account and a cash receipt of £15,750 had been posted to the suspense account. This represented the disposal proceeds from selling equipment, which had been purchased on 1 March 2017 at a cost of £48,000.
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Tonson depreciates non-current assets as follows:
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buildings at 1 per cent on a straight-line basis
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plant and equipment at 10 per cent on a straight-line basis
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motor vehicles at 20 per cent on a reducing balance basis.
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Non-current assets have no residual value. No
depreciation for the year ended 2021 has been entered into the accounting records. A full year’s depreciation is charged in the year of acquisition and none in the year of disposal. Depreciation expense for the year is included in administration expenses.At 31 December 2021, Tonson’s directors decided to revalue the buildings to £1,350,000. No entries have been made in the nominal ledger accounts.
Post-trial balance reconciliations showed that an invoice for £54,000 for insurance for the period from 1 October 2021 to 30 September 2022 had been paid and debited to the insurance account. Insurance costs are included in administration expenses.
A full year’s debenture interest is to be accrued.
At 31 December 2021, Tonson decided to write off a trade receivable of £2,400 and to make an allowance for irrecoverable receivables of 10 per cent of the outstanding receivables at that date. No entries have been made in the nominal ledger accounts.
No heat and lighting costs for the months of November and December 2021 have been recorded in the accounting records. The next quarter’s invoice for heat and lighting is expected to be £36,000. Heat and lighting costs are included in administration expenses.
For the financial year ended 31 December 2021, corporation tax is estimated to be £222,000 and the audit fee is estimated to be £180,000. These estimates have not been entered in the nominal ledger accounts.
Tonson is proposing a final dividend of 2 pence per share.
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