The ledger of Kingbird, Inc. on March 31 of the current year includes the selected accounts below before adjusting entries have been prepared. Debit Credit Supplies $7,200 Prepaid Insurance 8,640 Equipment 60,000 Accumulated Depreciation—Equipment $20,160 Notes Payable 48,000 Unearned Rent Revenue 29,760 Rent Revenue 144,000 Interest Expense 0 Salaries and Wages Expense 33,600 An analysis of the accounts shows the following. 1. The equipment depreciates $672 per month. 2. Half of the unearned rent revenue was earned during the quarter. 3. Interest of $960 is accrued on the notes payable. 4. Supplies on hand total $2,040. 5. Insurance expires at the rate of $960 per month. Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly.
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.
| Debit | Credit | |||
|---|---|---|---|---|
|
Supplies
|
$7,200 | |||
|
Prepaid Insurance
|
8,640 | |||
|
Equipment
|
60,000 | |||
|
|
$20,160 | |||
|
Notes Payable
|
48,000 | |||
|
Unearned Rent Revenue
|
29,760 | |||
|
Rent Revenue
|
144,000 | |||
|
Interest Expense
|
0 | |||
|
Salaries and Wages Expense
|
33,600 |
An analysis of the accounts shows the following.
| 1. | The equipment depreciates $672 per month. | |
| 2. | Half of the unearned rent revenue was earned during the quarter. | |
| 3. | Interest of $960 is accrued on the notes payable. | |
| 4. | Supplies on hand total $2,040. | |
| 5. | Insurance expires at the rate of $960 per month. |
Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
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No.
|
Date
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Account Titles and Explanation
|
Debit
|
Credit
|
|---|---|---|---|---|
|
1.
|
Mar. 31
|
enter an account title to record the first transaction
|
Enter a debit amount
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Enter a credit amount
|
|
enter an account title to record the first transaction
|
Enter a debit amount
|
Enter a credit amount
|
||
|
2.
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Mar. 31
|
enter an account title to record the second transaction
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Enter a debit amount
|
Enter a credit amount
|
|
enter an account title to record the second transaction
|
Enter a debit amount
|
Enter a credit amount
|
||
|
3.
|
Mar. 31
|
enter an account title to record the third transaction
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Enter a debit amount
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Enter a credit amount
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|
enter an account title to record the third transaction
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Enter a debit amount
|
Enter a credit amount
|
||
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4.
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Mar. 31
|
enter an account title to record the fourth transaction
|
Enter a debit amount
|
Enter a credit amount
|
|
enter an account title to record the fourth transaction
|
Enter a debit amount
|
Enter a credit amount
|
||
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5.
|
Mar. 31
|
enter an account title to record the fifth transaction
|
Enter a debit amount
|
Enter a credit amount
|
|
enter an account title to record the fifth transaction
|
Enter a debit amount
|
Enter a credit amount
|
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