Required Prepare the statement of comprehensive income for the year ended 31 October 2020 for publication, according to the requirements of the international accounting standards (IAS 1). Do show on a separate worksheet/s, the detailed workings on how you derived the earnings per share, cost of sales, distribution costs and administrative expenses.
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 are the account balances of Cutis Ltd as at 31 October 2020:
£
Sales 75,000
Purchases 15,075
Salaries and wages expense 4,675
General distribution costs 2,900
Other administrative expenses 2,100
Loan interest expense paid 750
Land at valuation 200,000
Building at cost 150,000
Equipment at cost 50,000
Accumulated depreciation – equipment (22,700)
Cash 1,300
Accounts receivable 19,080
Inventory as at 1 November 2019 875
Ordinary shares of £1 each 232,045
Retained earnings as at 1 November 2019 62,160
12% loan (due 31 October 2023) 12,500
Accounts payable 12,350
Additional information:
(i) The interest expenses on the loan are due half yearly on 1 November and 1 May. The first six months’ interest was paid.
(ii) The corporation tax charge for the year is estimated at £6,500.
(iii) The building is
(iv) Land is non-depreciable and is to be revalued to £300,000 on 31 October 2020 for the first time.
(v) Salaries and wages and equipment depreciation are to be apportioned: Distribution 80% Admin 20%.
(vi) Building depreciation is to be apportioned: Distribution 90% Admin 10%.
(vii) The inventory balances as at 31 October 2020 was £700.
Required
Prepare the statement of comprehensive income for the year ended 31 October 2020 for publication, according to the requirements of the international accounting standards (IAS 1). Do show on a separate worksheet/s, the detailed workings on how you derived the earnings per share, cost of sales, distribution costs and administrative expenses.
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