Timely Investments: As the inflow and outflow of cash is on time, you are left with adequate
free and liquid finances, which you may invest in time-bound instruments and securities
Outside investor need to know the working capital as they will evalute the feasibility and
capibility to repay the credit extended to the organization .In order to offers bank loan to Al
Saad in case they need additional capital to keep their current business afloat .
Problem worksheet 4.7
Salary Expenses
875,000
Cash
875,000
( Accured Salary )
Cash
4,800,000
Revenue
4,800,000
( Revenue Accured)
Total Salary = 875 ,000 +
15,000 = 890,000
Total revenue = 480,000 +
100,000 = 490,000
Rent Accured
100,000
Rent
100,000
Salary Expense
15,000
Salary
15,000
Cash
250,000
Accured Rent
100,000
Rent
150,000
GENERAL JOURNAL Page
Date
Accounts
Debit
Credit
Dec. 31
Salaries
Expense
15,000
Salaries
Payable
15,000
(year-end
adjustme
nt)
Dec. 31
Accounts
Receivab
le
100,000
Service
Revenue
100,000
(year-end
adjustme
nt)
Total Salaries Expense =875,000+15,000 = 890,000
Total Rent Revenue = 4,800,000 + 100,000 = 4,900,000
Jan. 1
Salaries
Payable
15,000
Salaries
Expense
15,000
Jan. 1
Service
Revenue
100,000
Accounts
Receivab
le
100,000
Jan. 10
Salaries
Expense
40,000
Cash
40,000
Jan. 15
Cash
250,000
Accounts
Receivab
le
250,000
Jan. 10
Salaries
Payable
15,000
Salaries
Expense
(20X5)
25,000
Cash
40,000
Jan. 15
Cash
250,000
Accounts
Receivab
le
100,000
Service
Revenue
150,000
The net result for salaries expense is the same regardless of whether we
reverse or not. That's on 1/10, a cash amount of $40,000 was paid to cover
salaries to date.
The net result for rent revenue is the same regardless of whether we
reverse or not. That's on 1/15, $250,000 of cash was collecte to offset rent
revenue to date.
