The following information was extracted from the financial statement of Barry for the year ended 31 December 2020. RM Sales 437,500 Opening inventories 17,500 Closing inventories 26,250 Cost of sales 262,500 Other income 3,750 Expenses 61,250 Current liabilities 47,250 Trade receivables 39,375 Bank 8,750 Cash 31,500
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.
Question 1
The following information was extracted from the financial statement of Barry
for the year ended 31 December 2020.
RM
Sales 437,500
Opening inventories 17,500
Closing inventories 26,250
Cost of sales 262,500
Other income 3,750
Expenses 61,250
Current liabilities 47,250
Trade receivables 39,375
Bank 8,750
Cash 31,500
(b) Calculate the following ratios of Barry Sdn Bhd for the year ended 31
December 2020.
(iv) Inventories turnover days
(v) Trade receivables turnover days
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