3. HARI OM TAT SAT Ltd. Delhi invoices goods to its Mumbai and Kolkata offices at 20% less than the list price which is cost plus 50% with instructions that cash sales are to be made at invoice price and credit sales at list price. Opening Stock at Mumbai at its cost '1,53,600. Goods Sent to Mumbai (at cost to Delhi) 2,20,000. Cash Sales 74.8% of Net Credit Sales. Goods returned by Credit Customers to Mumbai 90,000. Goods returned by Mumbai to Delhi 72,000. Loss of Goods by fire (at invoice price) ' 6,000 against which 80% of cost was recovered by the branch from the nsurance Company. Loss of Goods at Mumbai through normal pilferage (at list price) 6,000. Debtors at Mumbai: Opening 20,000,Closing 22,000 Cash remitted by Mumbal Branch to HO: 3,24,870. Discount Allowed to Debtors 26,730. Goods received by Mumbai till close of the year 2,54,000. Provision is to be made for discount on Debtors at 15% on prompt payments at year end on the basis of year's trend of prompt payments. Cash remitted by HO to Branch for Expenses: 18,000. Branch Expenses still outstanding 1482. Manager is entitled to a commission @ 6% of net profits after charging such commission. Net Credit Sales 2,00,000 Required: Prepare Mumbai Branch Debtors A/c, Mumbai Branch Stock Account, Mumbai Branch Adjustment A/c, Mumbai Branch Expenses Account and Mumbai Branch Profit & Loss A/c under Stock & Debtors Method.
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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