The following is the balance sheet of Sameed Brothers Corporation (000s omitted). Sameed Brothers CorporationBalance SheetDecember 31, 2020 Assets Current assets Cash $26,000 Marketable securities 18,000 Accounts receivable 25,000 Inventory 20,000 Supplies 4,000 Stock investment in subsidiary company 20,000 $113,000 Investments Treasury stock 25,000 Property, plant, and equipment Buildings and land 91,000 Less: Reserve for depreciation 31,000 60,000 Other assets Cash surrender value of life insurance 19,000 Total assets $217,000 Liabilities and Stockholders' Equity Current liabilities Accounts payable $22,000 Reserve for income taxes 15,000 Customers' accounts with credit balances 1 $ 37,001 Deferred credits Unamortized premium on bonds payable 2,000 Long-term liabilities Bonds payable 60,000 Total liabilities 99,001 Common stock Common stock, par $5 85,000 Earned surplus 24,999 Cash dividends declared 8,000 117,999 Total liabilities and stockholders' equity $217,000 Instructions Evaluate the balance sheet presented. State briefly the proper treatment of any item criticized.
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 following is the balance sheet of Sameed Brothers Corporation (000s omitted).
| Sameed Brothers Corporation Balance Sheet December 31, 2020 |
||||
| Assets | ||||
| Current assets | ||||
| Cash | $26,000 | |||
| Marketable securities | 18,000 | |||
| Accounts receivable | 25,000 | |||
| Inventory | 20,000 | |||
| Supplies | 4,000 | |||
| Stock investment in subsidiary company | 20,000 | $113,000 | ||
| Investments | ||||
| |
25,000 | |||
| Property, plant, and equipment | ||||
| Buildings and land | 91,000 | |||
| Less: Reserve for |
31,000 | 60,000 | ||
| Other assets | ||||
| Cash surrender value of life insurance | 19,000 | |||
| Total assets | $217,000 | |||
| Liabilities and |
||||
| Current liabilities | ||||
| Accounts payable | $22,000 | |||
| Reserve for income taxes | 15,000 | |||
| Customers' accounts with credit balances | 1 | $ 37,001 | ||
| Deferred credits | ||||
| Unamortized premium on bonds payable | 2,000 | |||
| Long-term liabilities | ||||
| Bonds payable | 60,000 | |||
| Total liabilities | 99,001 | |||
| Common stock | ||||
| Common stock, par $5 | 85,000 | |||
| Earned surplus | 24,999 | |||
| Cash dividends declared | 8,000 | 117,999 | ||
| Total liabilities and stockholders' equity | $217,000 |
Instructions
Evaluate the balance sheet presented. State briefly the proper treatment of any item criticized.
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