PR 4-1A Financial statements and closing Lamp Light Company maintains and repairs warning ligh radio towers and lighthouses. Lamp Light Company prepared the following end-of-period spreadsheet at December 31, 2016, the end of the fiscal year: 1 2 3 4 5 6 Account Title A 7 8 Cash 9 Accounts Receivable 10 Prepaid Insurance 11 Supplies 12 Land 13 Building 14 Accum. Depr.-Building 15 Equipment 16 Accum. Depr.-Equipment 17 Accounts Payable 18 Salaries & Wages Payable 19 Uneamed Rent 20 Ted Hickman, Capital 21 Ted Hickman, Drawing 22 Fees Eamed 23 Rent Revenue 24 Salaries & Wages Expense 25 Advertising Expense 26 Utilities Expense 27 Depr. Exp.-Building 28 Repairs Expense 29 Depr. Exp-Equipment 30 Insurance Expense 31 Supplies Expense 32 Misc. Expense 83 B 10,800 38,900 4,200 2,730 Unadjusted Trial Balance Dr. Cr. 98,000 400,000 101,000 10,000 163,100 21,700 11,400 D E Lamp Light Company End-of-Period Spreadsheet For the Year Ended December 31, 2016 Adjusted Adjustments 8,850 C 205,300 85,100 15,700 203,100 2,100 (g) 1,300 363,700 Dr. 4,320 875,000 875,000 UDDA (a) 11,300 02 (0)4,900 Cr. 7203 (d) 10,100 (e) 6,680 (b) 3,000 (c) 2,250 39,530 (b) 3,000 (c) 2,250 (d)10,100 (e) 6,680 (1) 4,900 (a)11,300 (g) 1,300 Trial Balance Dr. Cr. 10,800 50,200 1,200 480 98,000 400,000 101,000 10,000 G 168,000 21,700 215,400 91,780 15,700 4,900 800 203,100 375,000 1,300 11,400 10,100 8,850 6,680 3,000 2,250 4,320 39,530 907,980 907,980
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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