QUESTION 11 Dividends, reserves, retained earnings During the year ended 30 June 2022, the directors of Jindabyne Ltd declared and paid an interim dividend of $18,000 out of retained earnings. At the end of the year the financial statements showed a profit (before tax) of $460,000 out of which the directors made the following reserve transfers and tax liability. Income tax expense Reserves: Plant replacement General The beginning balance of retained earnings was $15,000 Required a. Prepare journal entries relating to the above transactions. Prepare the Retained Earnings account for Jindabyne Ltd for the year ended 30 June 2022. Complete Part (a) below: IMPORTANT - please take note of the below instructions (the system will mark you as incorrect if you don't follow these instructions) • Amounts: PLEASE USE COMMAS IN YOUR AMOUNTS (.e. use a comma as a thousands separator in your amounts) write your number in the following format: 2,560. not write 560 or 2560 or That is, spaces in your number please) not a Date 2022 2022 $140000 40 000 102 000 June 30 2022 June 30 2022 June 30 2022 June 30 2022 Account names (Declaring an interim dividend) (Payment of interim dividend) (Recording income tax liability) (Transfer to various reserves) Closing entries: (Recording profit for the year after tax) (Transfer profit to retained earnings) Debit (5) Credit (5)
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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