What are the account balances provided?
The account balances provided are as follows:
- Capital: R 450,000
- Drawings: R 15,000
- Loan: R 250,000
- SA Bank: R 7,500
- Trade receivables control: R 12,000
- Trade payables control: R 3,600
- Income received in advance: R 2,500
- Prepaid expenses: R 180,000
- Machinery: R 480,000
- Buildings: ?
Understanding the Account Balances
Capital: The Capital balance of R 450,000 indicates the initial amount of owner's equity or investment in the business.
Drawings: The Drawings account reflects the amount withdrawn by the owner for personal use, R 15,000 in this case.
Loan: The Loan account shows the amount borrowed by the business, which is R 250,000 in this scenario.
SA Bank: This account represents the balance held in the company's bank account, currently at R 7,500.
Trade Receivables Control: R 12,000 signifies the total amount owed to the company by its customers for goods or services provided on credit.
Trade Payables Control: R 3,600 represents the amounts owed by the company to its suppliers for goods or services purchased on credit.
Income Received in Advance: This indicates the amount received by the company for goods or services not yet provided, amounting to R 2,500.
Prepaid Expenses: R 180,000 shows expenses that have been paid in advance but have not yet been incurred.
Machinery: The Machinery balance of R 480,000 denotes the value of machinery owned by the business.
Buildings: The balance for Buildings is not provided, so the actual amount of the building's value is unknown without the specific figure.
In financial accounting, these account balances play a crucial role in determining the financial position and performance of a company. It is essential to track and analyze these balances to make informed business decisions and ensure financial stability.