Carla Vista Miniature Golf and Driving Range Inc. was opened on March 1 by Michael Wear. These selected events and transactions occurred during March. Mar. 1 Shareholders invested $48,000 cash in the business in exchange for common shares of the corporation. 3 Purchased Arnie's Golf Land for $36,480 cash. The price consists of land $22,080, building $8,640, and equipment $5,760. 5 Advertised the opening of the driving range and miniature golf course, paying advertising expenses of $1,520 cash. 6 Paid cash $2,320 for a 1-year insurance policy. 10 Purchased golf clubs and other equipment for $4,560 from Golde
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.
Carla Vista Miniature Golf and Driving Range Inc. was opened on March 1 by Michael Wear. These selected events and transactions occurred during March.
| Mar. | 1 | Shareholders invested $48,000 cash in the business in exchange for common shares of the corporation. | |
|---|---|---|---|
| 3 | Purchased Arnie's Golf Land for $36,480 cash. The price consists of land $22,080, building $8,640, and equipment $5,760. | ||
| 5 | Advertised the opening of the driving range and miniature golf course, paying advertising expenses of $1,520 cash. | ||
| 6 | Paid cash $2,320 for a 1-year insurance policy. | ||
| 10 | Purchased golf clubs and other equipment for $4,560 from Golden Bear Company, payable in 30 days. | ||
| 18 | Received golf fees of $1,120 in cash from customers for golf fees earned. | ||
| 19 | Sold 96 coupon books for $25 each in cash. Each book contains ten coupons that enable the holder to play one round of miniature golf or to hit one bucket of golf balls. (Hint: The revenue is not earned until the customers use the coupons.) | ||
| 25 | Declared and paid a $480 cash dividend. | ||
| 30 | Paid salaries of $640. | ||
| 30 | Paid Golden Bear Company in full for equipment purchased on March 10. | ||
| 31 | Received $800 in cash from customers for golf fees earned. | ||
| 31 | Paid estimated income taxes for the month amounting to $96. |
The company uses these accounts: Cash, Prepaid Insurance, Land, Buildings, Equipment, Accounts Payable, Deferred Revenue, Common Shares, Retained Earnings, Dividends Declared, Fees Earned, Advertising Expense, Salaries Expense, and Income Tax Expense.
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