The statement of financial position of Fateh Enterprise, a sole trader, for two successive years are shown Statement of Financial Position as 31 December 2019 2020 RM RM RM RM Non Current Asset Land and premises (cost RM52,000) 44,000 40,000 Plant and machinery: (Cost RM19,000) 14,250 - (Cost RM25,000) - 19,600 58,250 59,600 Current Asset Inventory 6,600 6,300 Trade account receivable 17,800 12,600 Bank - 7,100 24,400 26,000 82,650 85,600 FINANCED BY : Capital account: Balance at 1 January 42,000 47,000 Add: Net Profit for the year 18,000 22,000 60,000 69,000 Less:Drawing (13,000) (15,000) 47,000 54,000 Current Liabilities Trade account payable 22,000 11,600 Bank overdraft 13,650 - 35,650 11,600 Non Current Liabilities Loan(repayable December 2022) - 20,000 82,650 85,600 Required: Prepare statement of cash flow for Fateh Enterprise for the year ended 31 December 2020.
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
statement of financial position of Fateh Enterprise, a sole trader, for two successive years are shown
Statement of Financial Position as 31 December
|
|
2019 |
|
2020 | |
|
|
RM |
RM |
RM |
RM |
|
Non Current Asset |
|
|
|
|
|
Land and premises (cost RM52,000) |
|
44,000 |
|
40,000 |
|
Plant and machinery: |
|
|
|
|
|
(Cost RM19,000) |
14,250 |
- |
||
|
(Cost RM25,000) |
- |
19,600 |
||
|
|
|
58,250 |
|
59,600 |
|
Current Asset |
|
|
|
|
|
Inventory |
6,600 |
|
6,300 |
|
|
Trade account receivable |
17,800 |
|
12,600 |
|
|
Bank |
- |
|
7,100 |
|
|
|
|
24,400 |
|
26,000 |
|
|
|
82,650 |
|
85,600 |
|
FINANCED BY : |
|
|
|
|
|
Capital account: |
|
|
|
|
|
Balance at 1 January |
42,000 |
|
47,000 | |
|
Add: Net Profit for the year |
18,000 |
22,000 | ||
|
|
|
60,000 |
|
69,000 |
|
Less:Drawing |
|
(13,000) |
|
(15,000) |
|
|
|
47,000 |
|
54,000 |
|
Current Liabilities |
|
|
|
|
|
Trade account payable |
22,000 |
|
11,600 |
|
|
Bank overdraft |
13,650 |
|
- |
|
|
|
|
35,650 |
|
11,600 |
|
Non Current Liabilities |
|
|
|
|
|
Loan(repayable December 2022) |
|
- |
|
20,000 |
|
|
|
82,650 |
|
85,600 |
|
|
|
|
|
|
Required:
Prepare statement of cash flow for Fateh Enterprise for the year ended 31 December 2020.
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