Financial Accounting April2023
Financial Accounting April2023
Financial Accounting April2023
Ans 1.
Introduction:
A financial journal is a record of financial transactions that occur within a business. It is used
to keep track of all financial activities, including purchases, sales, payments, and receipts.
Financial journals are typically used by accountants and bookkeepers to maintain accurate and
up-to-date financial records for the business. The journal entries are recorded in a chronological
order, with each transaction being assigned a unique identification number. This helps to
maintain the accuracy of financial information and makes it easier to prepare financial
statements, such as balance sheets and income statements. Financial journals are an important
tool for businesses to monitor their financial health and make informed financial decisions.
Q2. Company DreamHigh Pvt. limited wants to distribute dividend to its shareholders.
There are two types of dividend, which a shareholder can receive in any accounting
year. Discuss the term dividend, its types, accounting treatment of dividend in the books
of accounts and a brief towards how cash flow on account of dividend is reflected in the
cash flow of a company (10 Marks)
Ans 2.
Ans 3a.
To calculate the required amounts, we can use the basic accounting equation:
Assets = Liabilities + Stockholders' Equity
a. Total assets: To calculate total assets, we need to add up all the assets of Z and X, LLP.
From the given information, we have:
Accounts receivable = 240
Supplies = 500
Equipment = 1000
Cash = 1170
Prepaid insurance = 100
Total assets = 240 + 500 + 1000 + 1170 + 100 = 3010
Therefore, the total assets of Z and X, LLP are 3010.
b. Total liabilities excluding stockholder equity: To calculate the total liabilities, we
need to add up all the liabilities of Z and X, LLP, excluding stockholder equity. From
the given information, we have:
Salaries payable = 167
Unearned revenue = 475
Accounts payable = 200
Total liabilities excluding stockholder equity = 167 + 475 + 200 = 842
Therefore, the total liabilities excluding stockholder equity of Z and X, LLP are
842.
c. Total stockholders' equity: To calculate the total stockholders' equity, we need to
subtract the total liabilities from the total assets. From the given information, we have:
Retained earnings = 668
Common stock = 1500
Total stockholders' equity = Total assets - Total liabilities excluding stockholder
equity = 3010 - 842 = 2168
Therefore, the total stockholders' equity of Z and X, LLP is 2168.
Q3b. Discuss the advantages of preparing the Balance Sheet.
(5 Marks)
Ans 3b.
The Balance Sheet is one of the three primary financial statements used to analyze a
company's financial health, alongside the Income Statement and Cash Flow Statement. It
is a snapshot of a company's financial position at a specific point in time, displaying the
company's assets, liabilities, and equity. There are several advantages to preparing a
balance sheet:
4. Compliance: Many businesses are required by law to prepare balance sheets for tax or
regulatory purposes. By keeping accurate balance sheets, businesses can ensure they
are complying with legal requirements and avoiding penalties.
5. Investor confidence: Preparing accurate and transparent balance sheets can increase
investor confidence in a company. Investors are more likely to invest in a company that
has a solid financial position and a transparent accounting process.
In conclusion, the balance sheet is an essential tool for evaluating a company's financial health,
making informed decisions, complying with legal requirements, and improving internal
controls. By preparing accurate and transparent balance sheets, businesses can build investor
confidence, improve strategic planning, and ultimately achieve long-term success.