Record each of these transactions in Journal entries and prepare the Ledger for Cash & Cash Equivalents, Accounts Receivable and Accounts Payable: 1st Sunny Barcelona started the business by depositing $50,000 received from the sale of capital stock in the company bank account. 22nd Purchased a building for $36,000, paying $6,000 in cash and issuing a note payable for the remaining $30,000. 25th Purchased tools and equipment on account, $13,800. 27th Sold some of the tools at a price equal to their cost, $1,800, collectible within 45 days. 2nd Received $600 in partial collection of the account receivable from the sale of tools. 7th Paid $6,800 in partial payment of an account payable. 11th Received $2,200 of sales revenue in cash. 2oth Purchased radio advertising from RAC105 to be aired in March. The cost was $470, payable within 30 days. 22nd Purchased office equipment for $15,000 cash. 26th Performed repair services and billed clients $2,000. The entire amount will not be collected until February.
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.
Record each of these transactions in
- 1st Sunny Barcelona started the business by depositing $50,000 received from the sale of capital stock in the company bank account.
- 22nd Purchased a building for $36,000, paying $6,000 in cash and issuing a note payable for the remaining $30,000.
- 25th Purchased tools and equipment on account, $13,800.
- 27th Sold some of the tools at a price equal to their cost, $1,800, collectible within 45 days.
- 2nd Received $600 in partial collection of the account receivable from the sale of tools.
- 7th Paid $6,800 in partial payment of an account payable.
- 11th Received $2,200 of sales revenue in cash.
- 2oth Purchased radio advertising from RAC105 to be aired in March. The cost was $470, payable within 30 days.
- 22nd Purchased office equipment for $15,000 cash.
- 26th Performed repair services and billed clients $2,000. The entire amount will not be collected until February.
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