The Trading and Profit and Loss Account for the year ended September 30, 2016. The Appropriation Account for the year ended September 30, 2016.
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.
Guardsman Ltd has an authorized capital of 500,000 $1 ordinary shares, of which $300,000 have been issued as fully paid. The following information was extracted from the accounts for the year ended September 30, 2016:
|
Details/Accts. |
$ |
$ |
|
Motor Vehicle at cost |
30,000 |
|
|
Freehold premises at cost |
187,500 |
|
|
Accumulated Provision for depreciation (Premises) |
|
8,000 |
|
Accumulated Provision for depreciation (Motor Vehicle) |
|
12,000 |
|
Carriage inwards |
10,125 |
|
|
Sales |
|
562,500 |
|
Stock, October 1, 2016 |
60,000 |
|
|
Administration (Wages and Salaries) |
15,000 |
|
|
Distribution (Wages and Salaries) |
30,000 |
|
|
Motor vehicle running costs |
8,250 |
|
|
Purchases |
322,500 |
|
|
Returns inward |
13,500 |
|
|
Returns outward |
|
18,750 |
|
Directors’ remuneration |
15,000 |
|
|
Auditors’ fees |
1,875 |
|
|
General administrative expenses |
6,750 |
|
|
Discounts allowed |
1,875 |
|
|
Retained earnings (1/10/2016) |
|
195,000 |
|
Ordinary Shares |
|
300,000 |
|
Interim Dividends paid |
15,000 |
|
|
Cash |
383,875 |
|
|
Creditors |
|
5,000 |
|
|
1,101,250 |
1,101,250 |
Additional Information:
- The closing stock was valued at $67,500 cost.
- The ordinary share dividends for the year were: Final 10% proposed.
- The directors decided to transfer $75,000 to General Reserve.
- Expenses in arrears at September 30, 2016 were:
- Motor vehicle running costs $825
- Salaries and wages: Distribution staff $2,250
- Expenses paid in advance at September 30, 2016 were: General administrative costs $1,125.
- The liability for corporation tax for the year ended September 30, 2016 had been agreed at $60,000.
- The company
depreciated freehold premises at 10% per annum on costs. - Depreciation for motor vehicle is provided at 5% per annum on a reducing balance basis.
- The company’s motor vehicles were used by staff as follows:
Distribution staff 50,000 miles per annum
Administration staff 20,000 miles per annum
How do you do the:
The Trading and
The Appropriation Account for the year ended September 30, 2016.
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