Rs. Rs. Sales 428,000 Purchases 304,400 Wages and salaries 64,000 Rent 14,000 Heating and lighting 5,000 Inventory as at 1 January 2013 15,000 Drawings 22,000 Allowance for doubtful debts 4,000 Non-current assets 146,000 Accumulated depreciation: 32,000 Trade receivables 51,000 Trade payables 42,000 Cash 6,200 Capital as at 1 January 2013 121,600 627,600 627,600 Further information:. a) Rs. 400 is owed for heating and lighting expenses. b) Rs. 700 has been prepaid for rent. c) that the allowance for doubtful debts should be increased to Rs. It is decided that a bad debt of Rs. 1,200 should be written off, and 4,500. d) Depreciation is to be provided for the year at 10% on cost e) Inventory at 31st December 2013 was valued at Rs. 16,500.
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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