On January 1, 2014, Salalima Company had Common Stock of 800,000 authorizedshares with P20 par value. The Stockholders' Equity accounts on January 1, 2014 had the following balances: Common Stock - P2,000,000 Additional Paid-in Capital - P600,000 Retained Earnings - P1,200,000 Transactions during the year and other information relating to shareholders' equity accounts were: 1. On January 5, Salalima issued at P54 per share, 100,000 preferred stock with P50 par value and 9% cumulative. Salalima had 400,000 authorized preferred shares. 2. On February 1, Salalima reacquired 10,000 common shares at P32 per share. 3. On April 30, Salalima sold 25,000 common stock at P34 per share. 4. On June 18, Salalima declared a cash dividend of P2 per common stock, payable on July 12, to shareholders of record on July 1. 5. On November 19, Salalima sold 5,000 shares of treasury for P42 per share. 6. On December 15, Salalima declared declared a yearly cash dividend on preferred stock, payable on January 14, 2015 on shareholders of record on December 31, 2014. 7. Net income for the year was P800,000 8. Salalima appropriated earnings equal to the cost of treasury shares. Determine the balances of the following accounts on December 31, 2014. 1. Deferred Stock 2.Common Stock 3.Additional Paid-in Capital
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.
On January 1, 2014, Salalima Company had Common Stock of 800,000 authorizedshares with P20 par value. The
Common Stock - P2,000,000
Additional Paid-in Capital - P600,000
Transactions during the year and other information relating to shareholders' equity
accounts were:
1. On January 5, Salalima issued at P54 per share, 100,000
2. On February 1, Salalima reacquired 10,000 common shares at P32 per share.
3. On April 30, Salalima sold 25,000 common stock at P34 per share.
4. On June 18, Salalima declared a cash dividend of P2 per common stock, payable
on July 12, to shareholders of record on July 1.
5. On November 19, Salalima sold 5,000 shares of treasury for P42 per share.
6. On December 15, Salalima declared declared a yearly cash dividend on preferred stock, payable on January 14, 2015 on shareholders of record on December 31, 2014.
7. Net income for the year was P800,000
8. Salalima appropriated earnings equal to the cost of treasury shares.
Determine the balances of the following accounts on December 31, 2014.
1. Deferred Stock
2.Common Stock
3.Additional Paid-in Capital
4.
5. Retained Earnings
6. Shareholders' Equity
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