The Sheridan Theater Inc. was recently formed. It began operations in March 2022. The Sheridan is unique in that it will show only triple features of sequential theme movies. On March 1, the ledger of The Sheridan showed Cash $15,500; Land $37.500; Buildings (concession stand, projection room, ticket booth, and screen) $20,500; Equipment $15,000; Accounts Payable $12,400; and Common Stock $76,100. During the month of March, the following events and transactions occurred: Rented the first three Star Wars movies (Star Wars. The Empire Strikes Back, and The Return of the Jedi) to be shown for the first three weeks of March. The film rental was $13,000: $1,600 was paid in cash and $11,400 will be paid on March 10. Ordered the first three Star Trek movies to be shown the last 10 days of March. It will cost $550 per night. Received $9.400 cash from admissions. 10 Paid balance due on Star Wars movies' rental and $2,800 on March 1 accounts payable. The Sheridan Theater contracted with R. Lazlo to operate the concession stand. Lazlo agrees to pay The Sheridan 15% of gross receipts, payable monthly, for the rental of the concession stand. Paid advertising expenses $500. Mar. 2 3 9 2 11 12 20 20 31 31 31 Received $9,600 cash from customers for admissions. Received the Star Trek movies and paid rental fee of $5,000. Paid salaries of $4,500. Received statement from R. Lazlo showing gross receipts from concessions of $10,600 and the balance due to The Sheridan of $1,590 ($10,600x.15) for March. Lazlo paid half the balance due for the rental of the concession stand and will remit the remainder on April 5. Received $24,500 cash from customers for admissions.
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.
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