Professor Hirt has an investment advisory and sports car acquisition consulting business. At the end of the 3rd quarter, these accounts had the following balances: JA Hirt, Capital $47,500 JA Hirt, Drawing $20,000 Consulting Revenue $23,500 Interest Revenue $1,500 Communications Expense $2,500 Entertainment (Happy Hour) Expense $15,000 Miscellaneous Expense $2,000 Travel Expense $8,000 All the balances are those that these accounts would normally have (as to either Debit or Credit). Using the Income Summary Account, record - in proper General Journal format - the Closing Entries IN PROPER ORDER, state the NET INCOME or NET LOSS, identifying which of the two it is, which is $ ________________, and state the balance in the JA Hirt, Capital account at the beginning of the 4th quarter, which is $ _______________.
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.
Professor Hirt has an investment advisory and sports car acquisition consulting business. At the end of the 3rd quarter, these accounts had the following balances:
JA Hirt, Capital $47,500
JA Hirt, Drawing $20,000
Consulting Revenue $23,500
Interest Revenue $1,500
Communications Expense $2,500
Entertainment (Happy Hour) Expense $15,000
Miscellaneous Expense $2,000
Travel Expense $8,000
All the balances are those that these accounts would normally have (as to either Debit or Credit).
Using the Income Summary Account, record - in proper General Journal format - the Closing Entries IN PROPER ORDER, state the NET INCOME or NET LOSS, identifying which of the two it is, which is $ ________________, and state the balance in the JA Hirt, Capital account at the beginning of the 4th quarter, which is $ _______________.
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