Balance Sheet December 31, 20X1 Assets Current assets: Cash $ 52,200 Marketable securities 24,400 Accounts receivable (net) 222,000 Inventory 238,000 Total current assets $ 536,600 Investments 65,900 Plant and equipment. $615,000 Less: Accumulated depreciation 271,000 Net plant and equipment 344,000 Total assets $ 946,500 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 93,400 Notes payable 70,600 Accrued taxes 17,000 Total current liabilities $ 181,000 Long-term liabilities: Bonds payable 153,200 Total liabilities $ 334,200 Stockholders' equity Preferred stock, $50 par value $ 100,000 Common stock, $1 par value 80,000 Capital paid in excess of par 190,000 Retained earnings 242,300 Total stockholders' equity $ 612,300 Total liabilities and stockholders' equity $ 946,500 SNIDER CORPORATION Income Statement For the Year Ending December 31, 20X1 Sales (on credit) $ 2,064,000 Cost of goods sold 1,313,000 Gross profit $ 751,000 Selling and administrative expenses 496,000 * Operating profit (EBIT) $ 255,000 Interest expense 26,900 Earnings before taxes (EBT) $ 228,100 Taxes 83,300 Earnings after taxes (EAT) $ 144,800 *Includes $36,100 in lease payments. What is the average collection period?
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.
| SNIDER CORPORATION Balance Sheet December 31, 20X1 |
|||
| Assets | |||
| Current assets: | |||
| Cash | $ | 52,200 | |
| Marketable securities | 24,400 | ||
| Accounts receivable (net) | 222,000 | ||
| Inventory | 238,000 | ||
| Total current assets | $ | 536,600 | |
| Investments | 65,900 | ||
| Plant and equipment. | $615,000 | ||
| Less: |
271,000 | ||
| Net plant and equipment | 344,000 | ||
| Total assets | $ | 946,500 | |
| Liabilities and |
|||
| Current liabilities: | |||
| Accounts payable | $ | 93,400 | |
| Notes payable | 70,600 | ||
| Accrued taxes | 17,000 | ||
| Total current liabilities | $ | 181,000 | |
| Long-term liabilities: | |||
| Bonds payable | 153,200 | ||
| Total liabilities | $ | 334,200 | |
| Stockholders' equity | |||
| $ | 100,000 | ||
| Common stock, $1 par value | 80,000 | ||
| Capital paid in excess of par | 190,000 | ||
| 242,300 | |||
| Total stockholders' equity | $ | 612,300 | |
| Total liabilities and stockholders' equity | $ | 946,500 | |
| SNIDER CORPORATION Income Statement For the Year Ending December 31, 20X1 |
|||
| Sales (on credit) | $ | 2,064,000 | |
| Cost of goods sold | 1,313,000 | ||
| Gross profit | $ | 751,000 | |
| Selling and administrative expenses | 496,000 | * | |
| Operating profit (EBIT) | $ | 255,000 | |
| Interest expense | 26,900 | ||
| Earnings before taxes (EBT) | $ | 228,100 | |
| Taxes | 83,300 | ||
| Earnings after taxes (EAT) | $ | 144,800 | |
*Includes $36,100 in lease payments.
What is the average collection period?
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