The following transactions took place in Chan Renovations Corporation during June 2019, its first month of operation. Jun. 1 Issued share capital for $8,000 cash 1 Purchased $5,000 of equipment on credit 2 Collected $600 cash for repairs completed today 3 Paid $20 for supplies used today 4 Purchased $1,000 of supplies on credit (recorded as unused supplies) 5 Billed customers $2,500 for repairs performed to date 8 Collected $500 of the amount billed on June 5 10 Paid half of the amount owing for equipment purchased on June 1 15 Sold excess equipment for $1,000 (its original cost). The buyer will pay this amount in several months. (Recorded as accounts receivable). 18 Paid for the supplies purchased on June 4 20 Received a $100 bill for electricity used to date (recorded as utilities expense) 22 Paid $600 to the landlord for June and July rent (recorded as prepaid rent) 23 Signed a union contract that will increase wages 5% this year. 25 Collected $1,000 of the amount billed on June 5 27 Paid the following expenses in cash: advertising, $150; telephone, $50; truck operating expense, $1,000; wages, $2,500 30 Billed customers $2,000 for repairs completed to date 30 Transferred the amount for June's rent to rent expense ($300) 30 Counted $150 of supplies still on hand (recorded the amount used as supplies expense). Required: 1. Open general ledger T-accounts for the following (account numbers are indicated in brackets): Cash (101), Accounts Receivable (110), Prepaid Rent (162), Unused Supplies (172), Equipment (183), Accounts Payable (210), Share Capital (320), Repair Revenue (450), Advertising Expense (610), Rent Expense (654), Supplies Expense (668), Telephone Expense (669), Truck Operating Expense (670), Utilities Expense (676), and Wages Expense (677). 2. Prepare journal entries to record the June transactions including general ledger account numbers. 3. Post the June entries to the T-accounts. 4. Prepare a trial balance at June 30, 2019 5. Prepare an income statement and statement of changes in equity for the month ended June 30, 2019 and a statement of financial position at June 30, 2019.
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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