⭐ RELATIONSHIP BETWEEN FINANCIAL STATEMENTS [PART : 4] ⭐

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ALL ABOUT ACCOUNTING : 49th BLOG

         💎ACCOUNTING💎

★ Accounting exercise and practices : 
Lesson : 5 [Part : 4]

Hi friends 🙏

Today's discuss final exercise Relationship between Financial Statements. 

                             So let's discuss ....

* RELATIONSHIP BETWEEN FINANCIAL STATEMENTS :

1. What are two examples of non-cash items? 
* Ans :
i. Depreciation Expense
ii. Provision for Loan Losses

2. What is the purpose of creating the Statement of Changes in Financial Position?
* Ans :
The Statement of Changes in Financial Position is created in order to determine whether an
organization has enough cash flow (or working capital) from operations and other sources and
uses of cash.
It is important that cash flow be forecasted accurately for two reasons: 
(i) Idle funds are expensive. If an Organization has branches which it charges for 
funds disbursed to them then excess cash sitting at the branch is expensive due to 
the “cost of funds” charged to the branches by Head Office. 
(ii) If the Organization is left without enough cash, bills may go unpaid or clients may go
without their loans. 

3. What are the elements which change Equity? 
*Ans :
There are three elements which change equity: 
(i) income
(ii) investments by owner(s) 
(iii) distribution to owner(s) 

4. Which elements increases Equity ? 
* Ans : 
1. Net Surplus - current year 
2.Donation to Loan Fund Capital

5. Which elements decreases Equity. ?
* Ans :
1.Dividend payment to shareholders
2.Net Loss - current year

6. On the basis of the Loan Fund information supplied, show the relationship between financial 
statements as at March 31 2020:

                                 RELATIONSHIP BETWEEN FINANCIAL STATEMENTS





PARTICULARS       B Trans.          INCOME STATEMENT                              BALANCE SHEET
                                                                          Revenue          Expenses                                   Assets         Liabilities         Equity

Salaries & Benefits                 25,000                                         25,000                                                                                             
Grant income - fund                 50,000                                                                                                                                   50,000  

Cash & current accounts         17,000                                                                                         17,000                                             
Communications                      4,000                                            4,000                                                                                             
Loans outstanding - gross   4,00,000                                                                                       4,00,000                                             
Provision for Loan Losses      15,000                                         15,000                                                                                             
Property & equipment - gross 20,000                                                                                       20,000                                            
Travel                                      15,000                                          15,000                                                                                           
Short-term borrowings            50,000                                                                                                               50,000                      
Interest paid on deposits           3,000                                            3,000                                                                                           
Accumulated depreciation        1,500                                                                                         (1500)                                             
Rent                                           5,000                                          5,000                                                                                             
Interest income -                      15,000                15,000                                                                                                                    
investments
Interest bearing deposits          35,000                                                                                       35,000                                            
Staff training                            10,000                                         10,000                                                                                          
Long-term investments            50,000                                                                                       50,000                                            
Interest paid on debt                15,000                                         15,000                                                                                          
Client savings                          10,000                                                                                                             10,000                      
Depreciation                              1,500                                          1,500                                                                                           
Loan Loss Reserve                   25,000                                                                                     (25,000)                                          
Interest income - current loans  60,000            60,000                                                                                                                     
Long-term debt                        2,00,000                                                                                                         2,00,000                    
Loan fees                                    24,000           24,000                                                                                                                      
Loan fund capital                     1,80,000                                                                                                                              1,80,000
Net Retained Surplus/(Deficit)            0                                                                                                                                          0
TOTAL  :                                                           99000             93500                                 4,95,500            2,60,000         2,30,000
Net (Deficit) - current year                                                     +5,500                                                                                     +5,500
TOTALS                                          99000         99000                        4,95,500       2,60,000      2,35,500


             




Remaining part of  Relationship between financial statements discuss in 50th blog... 

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