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Week - 5 Financial Reporting Process 2

The document outlines the accounting cycle, detailing the steps involved from the general journal to closing entries, and emphasizes the importance of financial reporting for various users. It provides examples of trial balances, income statements, and statements of owner's equity for a fictional firm, XYZ-Firm, for the year ended December 31, 2022, including adjustments needed for accurate financial reporting. The document serves as a comprehensive guide for understanding the financial reporting process and the preparation of key financial statements.

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hassanalishba03
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16 views6 pages

Week - 5 Financial Reporting Process 2

The document outlines the accounting cycle, detailing the steps involved from the general journal to closing entries, and emphasizes the importance of financial reporting for various users. It provides examples of trial balances, income statements, and statements of owner's equity for a fictional firm, XYZ-Firm, for the year ended December 31, 2022, including adjustments needed for accurate financial reporting. The document serves as a comprehensive guide for understanding the financial reporting process and the preparation of key financial statements.

Uploaded by

hassanalishba03
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Accounting Cycle

1 General Journal
2 General Ledger
3 Trial Balance
4 Adjusting Entries
5 Adjusted Trial Balance
6 Income Statement Financial
7 Statement of owner's equity / Capital Report
8 Statement of financial position or balance sheet
9 Closing Entries
10 Opening Entries
11
Financial Reporting Process
Supplying general purpose accounting information Users
to different users for making economic decisions. Owner
Generally, these reports are presented in '4 sets'of Creditors
financial statements at the end of accounting period. FBR or Govt.
1. Income Statement or Statement of profit or loss Debtors
It describes the results or performance of the Supplier
business at the end of accounting period. Competitors
Profit = Total Revenues - Total Expenses Custorms
Managers
2. Statementowner's
It describes of owner's
claimequity
in the business at the end of etc.
accounting period.

3. Statement of Financial Position or Balance Sheet


It describes the financial position of the business at the end…….
XYZ - FIRM
TRIAL BALANCE
For the Year Ended December 31st, 2022
Descriptions Debit Credit
Cash 250,000
Services Receivable 70,000
Office supplies 30,000
Prepaid Advertising 55,000
Office Shop 800,000
Office furniture and fixture 300,000
Accounts Payable 105,000
Lond Term Loan 240,000
Capital 830,000
Drawing 40,000
Utility Expenses 80,000
Salaries Expenses 60,000
Rent Expenses 55,000
Commission Revenues 190,000
Services Revenues 375,000
TOTAL 1,740,000 1,740,000
Data for Adjustment at December 31st, 2022:
i) Outstanding Salaries for the period Rs. 15,000.
ii) Services earned but not received for the year Rs. 60,000
iii) Allocated depreciation 10% for the year on all fixed assets.
iv) Tax unpaid for the year 30%
v) 7% Accrued interest on long term bank loan for the year.
vi) Advertising expired for the year to the extent Rs. 15,000
vii) Office supplies used during the period Rs. 7,000.
Required:
a) Income statement
b) statement of owner's equity
c) Statement of financial position

Payable =
Outstanding / Accrued / Unpaid/
is due / owe to / to be paid / Payable

Receivable =
Earned but not received / Accrued income/
To be received
XYZ - FIRM
INCOME STATEMENT
For the Year Ended December 31st, 2022
REVENUES Rs. Rs.
Commission Revenues 190,000
Services Revenues (375,000+60,000) 435,000
Total Revenues 625,000
LESS: EXPENSES
Utility Expenses 80,000
Salaries Expenses (60,000 + 15,000) 75,000
Rent Expenses 55,000
Depreciation Expenses (Office Shop) 80,000
Depreciation Expenses (Office Fur.) 30,000
Advertising Expenses 15,000
Office Supplies Expenses 7,000
Total Expenses - 342,000
Earnings Before interest & taxes 283,000
Less: Interest (240,000 x 7%) 7% - 16,800
Earnings Before Taxes 266,200
Less: Taxes (266,200 x 30%) 30% - 79,860
Earnings After Taxes / Operating Profit 186,340

STAEMENT OF OWNER'S EQUITY


Capital at start 830,000
Less: Drawing - 40,000
Add: Earnings After Taxes 186,340
Capital at end 976,340
XYZ - FIRM
TRIAL BALANCE
For the Year Ended December 31st, 2022
Descriptions Debit Credit
Cash 60,000
Fees Receivable 115,000
Office supplies 12,000
Prepaid Advertising 20,000
Office Equipment 500,000
Office Furniture 300,000
Accounts Payable 70,000
Notes payable 120,000
Capital 264,000
Drawing 15,000
Additional Investment 40,000
Utility Expenses 17,000
Salaries Expenses 65,000
Rent Expenses 40,000
Fees Expenses 50,000
Commission Income 300,000
Fees Income 400,000
TOTAL 1,194,000 1,194,000
Data for Adjustment at December 31st, 2022:
i) Prepaid rent for the year Rs. 5,000.
ii) Accrued fees income for the year Rs. 90,000
iii) Allocated depreciation 10% for the year on all fixed assets.
iv) Tax unpaid for the year 30%
v) 8% Accrued interest on notes payable for the year.
vi) Advertising unexpired for the year to the extent Rs. 5,000
vii) Office supplies unused during the period Rs. 5,000.
viii) Actual Salaries expired for the year Rs. 60,000.

Required:
a) Income statement
b) statement of owner's equity
c) Statement of financial position
XYZ - FIRM
TRIAL BALANCE
For the Year Ended December 31st, 2022
Descriptions Debit Credit
Cash 468,000
Services Receivable 25,000
Office supplies 10,000
Prepaid Advertising 25,000
Office Shop 1,200,000
Office furniture and fixture 105,000
Accounts Payable 15,000
Notes payable 45,000
Capital 1,600,000
Drawing 15,000
Utility Expenses 12,000
Salaries Expenses 50,000
Rent Expenses 35,000
Commission Revenues 110,000
Services Revenues 175,000
TOTAL 1,945,000 1,945,000
Data for Adjustment at December 31st, 2022:
i) Outstanding Salaries for the period Rs. 10,000.
ii) Services earned but not received for the year Rs. 40,000
iii) Allocated depreciation 10% for the year on all fixed assets.
iv) Tax unpaid for the year 20%
v) 5% Accrued interest on notes payable for the year.
vi) Advertising expired for the year to the extent Rs. 10,000
vii) Office supplies used during the period Rs. 4,000.
Required:
a) Income statement
b) statement of owner's equity
c) Statement of financial position

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