The following is the summary of the receipts and issues of material in a Special Ice factory during December 2020. Prepare Store Ledger according to First in First Out Method. December 2020 Dec 1. Opening balance 500 units @ GH¢25 per unit Dec 3. Issue 70 units Dec 4. Issue 100 units Dec 8. Issue 80 units Dec 13. Received from supplier 200 units @ GH¢24.50 per unit Dec 14. Returned to store 15 units @ GH¢24 per unit Dec 16. Issue 180 units. Dec 20. Received from supplier 240 units @ GH¢24.75 per unit Dec 24. Issue 304 units. Dec 25. Received from supplier 320 units @ GH¢24.50 per unit Dec 26. Issue 112 units Dec 27. Returned to store 12 units @ GH¢24.50 per unit Dec 28. Received from supplier 100 units @ GH¢25 per unit
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 summary of the receipts and issues of material in a Special Ice factory during December 2020. Prepare Store Ledger according to First in First Out Method.
December 2020
Dec 1. Opening balance 500 units @ GH¢25 per unit
Dec 3. Issue 70 units
Dec 4. Issue 100 units
Dec 8. Issue 80 units
Dec 13. Received from supplier 200 units @ GH¢24.50 per unit
Dec 14. Returned to store 15 units @ GH¢24 per unit
Dec 16. Issue 180 units.
Dec 20. Received from supplier 240 units @ GH¢24.75 per unit
Dec 24. Issue 304 units.
Dec 25. Received from supplier 320 units @ GH¢24.50 per unit
Dec 26. Issue 112 units
Dec 27. Returned to store 12 units @ GH¢24.50 per unit
Dec 28. Received from supplier 100 units @ GH¢25 per unit
b. Two components P, Q are used as follows.
Normal usage 1000 units per week each.
Re-ordering quantity P - 20,000 units
Q - 8,000 units
Re-ordering period P - 4 to 6 weeks
Q - 2 to 4 weeks
The minimum usage is 2000 units per week; with their maximum usage being 3000 units per week each.
You are required to calculate:
(i) Minimum Stock Level
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