Question 1 You have extracted the following Trial Balance from the books of Asempa Ye Tia at 31st January 2008. ¢ ¢ Capital 12,000,000 Bank charges 29,650 IRS (Withheld Income Tax) 33,150 Creditors 4,825,250 Debtors 3,795,800 Discounts Allowed 115,000 Discounts Received 199,000 Drawings 200,000 General Expenses 300,000 Insurance 750,000 Loan Account 2,500,000 Motor Vehicle (Cost ¢6,000,000) 4,800,000 Motor Vehicle Running Exp. 370,000 Other Employment Costs 77,500 Purchases 23,010,150 Rent 50,000 Returns Inwards Account 112,200 Returns Outwards Account 59,900 Salaries 620,000 Sales 28,110,000 Shop Furniture, Fixtures and Fittings (Cost ¢1,750,000) 1,500,000 Stock 1Jan 2008 250,000 Cash at Bank 11,630,000 Cash at Hand 117,000 47,727,300 47,727,300 You are to prepare a Trading and Profit and Loss Account for the month of January 2008, and a Balance Sheet as at that date, taking into consideration the following additional information: Somu Yie Enterprises for ¢800,000 worth of goods that had not been received by the Purchases recorded during the month includes an invoice, dated 3rd February from close of business on 31st The proprietress proposes to purchase a Benz C200 Saloon car at the end of December 2008. She has been assured by the prospective seller that the vehicle will be cost her not more than ¢8,700,000 and to meet this cost, she has been paying into the business a weekly sum of ¢217,500 from her private earnings. Five such payments by her during the month have been erroneously treated as cash sales in the books. Insurance paid cover the six months, Jan to June 2008. Repair work done by a local carpenter on shop fittings has not been paid, the bill thereof for ¢45,000 having been submitted to the business. The proprietress had drawn ¢50,000 on an I.O.U on 30th Jan, to meet some domestic expenses; this is included in the balance shown as cash in Hand. Motor Vehicle and shop Furniture, Fixtures, etc. are to be depreciated at 20per cent and 142/7 per cent per annum respectively on cost. Value of stock at 31st Jan. 2008, has been correctly ascertained to be ¢820,050.
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 1
You have extracted the following
January 2008.
¢ ¢
Capital 12,000,000
Bank charges 29,650
IRS (Withheld Income Tax) 33,150
Creditors 4,825,250
Debtors 3,795,800
Discounts Allowed 115,000
Discounts Received 199,000
Drawings 200,000
General Expenses 300,000
Insurance 750,000
Loan Account 2,500,000
Motor Vehicle (Cost ¢6,000,000) 4,800,000
Motor Vehicle Running Exp. 370,000
Other Employment Costs 77,500
Purchases 23,010,150
Rent 50,000
Returns Inwards Account 112,200
Returns Outwards Account 59,900
Salaries 620,000
Sales 28,110,000
Shop Furniture, Fixtures and Fittings
(Cost ¢1,750,000) 1,500,000
Stock 1Jan 2008 250,000
Cash at Bank 11,630,000
Cash at Hand 117,000
47,727,300 47,727,300
You are to prepare a Trading and
- Somu Yie Enterprises for ¢800,000 worth of goods that had not been received by the Purchases recorded during the month includes an invoice, dated 3rd February from close of business on 31st
- The proprietress proposes to purchase a Benz C200 Saloon car at the end of December 2008. She has been assured by the prospective seller that the vehicle will be cost her not more than ¢8,700,000 and to meet this cost, she has been paying into the business a weekly sum of ¢217,500 from her private earnings. Five such payments by her during the month have been erroneously treated as cash sales in the books.
- Insurance paid cover the six months, Jan to June 2008.
- Repair work done by a local carpenter on shop fittings has not been paid, the bill thereof for ¢45,000 having been submitted to the business.
- The proprietress had drawn ¢50,000 on an I.O.U on 30th Jan, to meet some domestic expenses; this is included in the balance shown as cash in Hand.
- Motor Vehicle and shop Furniture, Fixtures, etc. are to be
depreciated at 20per cent and 142/7 per cent per annum respectively on cost. - Value of stock at 31st Jan. 2008, has been correctly ascertained to be ¢820,050.
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