Prepare Ledger Postings and prepare a Trial Balance from the information provided: Debit Balances as on Jan. 1, 2018: Cash in hand shs. 8,000; Cash at Bank shs. 25,000; Stock of goods shs. 20,000; Furniture shs. 2,000; Building shs. 10,000; Sundry Debtors-Vijay shs. 2,000, Anil shs. 1,000 and Madhu shs. 2,000. Credit Balances on Jan. 1, 2018: Sundry Creditors- Anand shs. 5,000; Loan from Bablu shs. 10,000. The following were further transactions in the month of Jan Jan. 1: Purchased goods worth shs. 5,000 for cash less 20% trade discount and 5% cash discount. Jan. 4: Received shs. 1,980 from Vijay and allowed him shs. 20 as discount. Jan. 6: Purchased goods from Bharat shs. 5,000. Jan. 8: Purchased plant from Mukesh for shs. 5,300 Jan. 12: Sold goods to Rahim on credit shs. 600. Jan. 18: Sold goods to Ram for cash shs. 1,000 Jan. 20: Paid salary to Ratan shs. 2,000 Jan. 21: Paid Anand shs. 4,800 in full settlement. Jan. 26: Interest received from Madhu shs. 200 Jan. 28: Paid to Bablu interest on Loan shs. 500 Jan. 31: Sold goods for cash shs. 500 Jan. 31: Withdraw goods from business for personal use shs. 200
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.
Prepare
Debit Balances as on Jan. 1, 2018: Cash in hand shs. 8,000; Cash at Bank shs. 25,000; Stock of goods shs. 20,000; Furniture shs. 2,000; Building shs. 10,000; Sundry Debtors-Vijay shs. 2,000, Anil shs. 1,000 and Madhu shs. 2,000.
Credit Balances on Jan. 1, 2018: Sundry Creditors- Anand shs. 5,000; Loan from Bablu shs. 10,000.
The following were further transactions in the month of Jan
Jan. 1: Purchased goods worth shs. 5,000 for cash less 20% trade discount and 5% cash discount.
Jan. 4: Received shs. 1,980 from Vijay and allowed him shs. 20 as discount.
Jan. 6: Purchased goods from Bharat shs. 5,000.
Jan. 8: Purchased plant from Mukesh for shs. 5,300
Jan. 12: Sold goods to Rahim on credit shs. 600.
Jan. 18: Sold goods to Ram for cash shs. 1,000
Jan. 20: Paid salary to Ratan shs. 2,000
Jan. 21: Paid Anand shs. 4,800 in full settlement.
Jan. 26: Interest received from Madhu shs. 200
Jan. 28: Paid to Bablu interest on Loan shs. 500
Jan. 31: Sold goods for cash shs. 500
Jan. 31: Withdraw goods from business for personal use shs. 200
Step by step
Solved in 4 steps
