The following list of account balances were extracted from the accounting records of Don's Electrical Services as at 28 February 2021: List of accounts Debit - R Credit - R Land and buildings at cost 250 000 Vehicles at cost 155 000 Accumulated depreciation: Vehicles-1 March 2020 90 000 Equipment at cost Accumulated depreciation: Equipment -1 March 2020 12% Fixed deposit: Lock Bank 85 000 40 000 30 000 Inventory: Consumables -1 March 2020 21 000 Debtors' control 25 000 Allowance for credit losses 1 125 Bank 80 373 Long tem boTowing: 10% per year 37 500 Creditors' control 20 835 Capital: Don Dude 197 500 Drawings 89 327 Service fees 524 835 Interest on fixed deposit 1 088 Rent income 19 180 Advertising 735 2 100 6 078 Credit losses Communication costs Consumables purchased 84 148 Other operating expenses 02 002 Interest on borrowings 3 000 932 663 932 663 Additional information that needs to be taken into account: 1. Stock taking was done on 28 February 2021 and the consumable inventory on hand was valued at R32 700. 2. The advertising amount includes a contract for R2 400 that was taken for the period 1 January 2021 to 30 June 2021. 3. Don received an amount of R000 from an insolvent debtor which was comectly recorded. However this was only 25% of the total amount owed by the debtor. The outstanding balance must now be written off as imecoverable. 4. The Allowance for oredit losses must be increased by R250. 5. Communication costs include valid prepaid phone cards to the value of R1 200. 6. Investment in the fixed deposit was made 31 Marah 2020 and matures on 31 May 2022. Record the outstanding interest on the fixed deposit. 7. Vehicles and Equipment must be depreciated as follows for the current year, , • Vehicles at 20% on cost, and • Equipment at 15% using the diminishing balance method. No vehiales or equipment were bought or sold during the year. 8. The long term borrowing was taken on 31 July 2019 and the loan was to be settled by 4 equal annual instalments beginning 31 August 2020. Provide for the outstanding interest due for the current year. A statement dated 28 February 2021 from the creditor revealed the following: 0. Date Details Amount - R March 2020 Balance 50 000 31 August 2020 Less: Payment of 1" instalment (12 500) 28 February 2021 Balance 37 500 10. Rent has been received for the period 1 March 2020 to 31 March 2021. Rent was increased by 10% with effect from 1 September 2020. Adjust the above records for the amount received in advance for March 2021. Required: Prepare the statement of profit or loss and other oomprehensive income (SOCI) for the year ended 28 February 2021 to comply with the requirements of Intemational Financial Reporting Standards (IFRS) appropriate to Don's Electrical Services.
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.
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