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FINANCIAL ACCOUNTING
Posted by Chester Morton / Monday 2 May 2016 / No comments
Financial Statements
The Financial Statements
THE STATEMENT OF FINANCIAL POSITION ( BALANCE SHEET)
This is a financial statement which shows the financial position of a business at a particular time. It is basically a summary of the assets, liability, and capital of a business. It can be prepared in two different formats.
2.
Vertical Presentation (recommended format)
Horizontal Presentation
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER, 2008
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Capital
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Fixed Assets:
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Add Net Profit
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Land and Building
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Plant and Equipment
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Less Drawings
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Furniture and Fittings
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Current Assets:
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Long Liability:
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Stocks
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Long-term Loan
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Debtors
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Prepaid Expenses
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Current Liabilities:
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Cash at bank
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Trade Creditors
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Cash on hand
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Expenses Owing
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Expenses have as the decreases in
economic benefits during the accounting period in the form of outflows or
depletion of assets or incurrence of liabilities those results in decreases in
equity, other than those relating to distributions to equity participants.
Income can be defined as increases
in economic benefits during the accounting period. This is in the form of inflows or enhancements of
assets or decreases of liabilities that result in increases in equity, other
than those relating to contributions from equity participants.
The Income Statement can be
prepared in two different formats.
1.
Horizontal Presentation or
2.
Vertical Presentation (recommended format)
Example 1
Show the effects of the following
transactions, one after the other, on the statement of financial position:
Jan 1: John started a business with
cash of $1,200.
Jan 2: Bought goods worth $450 on
credit for resale from Hews Enterprise.
Jan 5: Bought goods for with cash
$500.
Jan 11: Sold goods with a cost of
$320 on credit for $900.
Jan15: Paid wages and salaries by
cash $220.
Jan 20: Received a loan of $2,000
from a bank.
Jan 30: Purchase a motor vehicle
costing $1,300 by cheque.
Jan 31: Sold goods with a cost of
$700 for cash $1,800
Jan 31: Repaid part of the loan
$800.
Example 2
The following transactions
occurred in the records of Alex Enterprise. Show the effect of each transaction
at the end of the day on the statement of financial position.
Mar 1: Alex started a business with
the following:
$
Inventory
550
Motor
vehicle 2,300
Cash
in hand 920
Cash
at bank 2,800
Mar 5: Bought goods on credit
from Appiah $100
Mar 11: Sold goods costing $200
for $800 on credit to Amah.
Mar 15: Returned some of the
goods bought on March 5 $300
Mar 20: Sold goods costing $50
for cash $760.
Mar 28: Paid electricity expenses
by cheque $800.
Mar 30: Alex, the proprietor,
withdrew $700 for his personal expenses.
Mar 31: Amah returned part of the
goods sold to him on March 11. The selling price was $600.
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FINANCIAL ACCOUNTING
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