The homework problems for Chapter 12 will use Larry's Landscaping. To refresh your knowledge of Larry's Landscaping, see the heading "Larry's Landscaping, Inc. Starts Business" on Pg 155. The following are the Balance Sheets for Larry's Landscaping as of March 31, 2021 (the end of last period) and April 30, 2021 (the end of this period): April 30, 2021 March 31, 2021 Assets Cash $ 17,500 $ 21,000 1,500 3,300 25,800 Supplies Prepaid Insurance Total Current Assets 17,500 Equipment Building Accumulated Depreciation Equipment Accumulated Depreciation Building Land 40,000 100,000 (1,000) (2,000) 20,000 Total Property, Plant & Equipment 157,000 Total Assets $182.800 40,000 100,000 (500) (1,000) 20,000 158,500 $176.000 Liabilities Interest Payable 550 550 110,000 110,550 2$ Total Current Liabilities Note Payable Long-Term 110.000 110,000 Total Liabilities Owners' Equity Common Stock Paid-in Capital in Excess of Par Value .. Retained Earnings 6,000 54,000 12,250 72,250 Total Liabilities and Equity $182.800 6,000 54,000 6,000 66,000 $176.000 Total Owners' Equity The following is additional information for the period April 1 to April 30, 2021: D The Income Statement for April showed a Net Income of $6,250. D No Dividends were declared during the month of April.
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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