Karen Noonan opened Sage Hill Cleaning Services Inc. on February 1, 2022. During February, the following transactions were completed: Feb. 1 Issued 4,100 shares of Sage Hill Cleaning Services common stock for $10,660. Each share has a $1.50 par. 1 Borrowed $6,560 on a 2-year, 6% note payable. 1 Paid $7,400 to purchase used floor and window cleaning equipment from a company going out of business ($3,950 was for the floor equipment and $3,450 for the window equipment). Paid $180 for February Internet and phone services. 3 Purchased cleaning supplies for $800 on account. 4 Hired 4 employees. Each will be paid $390 per 5-day work week (Monday- Friday). Employees will begin working Monday, February 9. 5 Obtained insurance coverage for $8,070 per year. Coverage runs from February 1, 2022, through January 31, 2023. Karen paid $2,018 cash for the first quarter of coverage. 5 Discussions with the insurance agent indicated that providing outside window cleaning services would cost too much to insure. Karen sold the window dleaning equipment for $3,240 cash. 16 Billed customers $3,200 for cleaning services performed through February 13, 2022. Received $432 from a customer for 4 weeks of deaning services to begin February 21, 2022. (By paying in advance, this customer received 10% off the normal weekly fee of $120.) 17 18 Paid $250 on amount owed on cleaning supplies. 20 Paid $3 per share to buy 250 shares of Sage Hill Cleaning Services common stock from a shareholder who disagreed with management goals. The shares will be held as treasury shares. 23 Billed customers $3,530 for cleaning services performed through February 20. 24 Paid cash for employees' wages for 2 weeks (February 9-13 and 16-20). 25 Collected $2,050 cash from customers billed on February 16. 27 Paid $180 for Internet and phone services for March. 28 Declared and paid a cash dividend of $0.20 per share.
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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