Absolutely Lets break down this accounting quiz stepbystep Understanding the Problem The quiz asks you to prepare four fundamental financial statements for ABC Sole Proprietorship Statement of Cash Flow Shows how cash has changed during the period Statement of Financial Performance Income Statement Reports the companys revenues and expenses to determine net income Statement of Financial Position Balance Sheet Presents a snapshot of the companys assets liabilities and equity at a specific point in time Statement of Changes in Equity Details how the owners equity has changed over the period Given Information Account Balances December 31 2023 This provides the starting balances for the Balance Sheet Transactions during the Year These are the events that need to be analyzed and used to create the Cash Flow Statement and Income Statement and to update the Balance Sheet and Equity Statement Step 1 Analyze the Transactions Lets break down each transaction and see how it affects the accounts Collected 25000 from customers Cash 25000 Cash Inflow Accounts Receivable 25000 Assuming this was on account Paid 10000 for accounts payable Cash 10000 Cash Outflow Accounts Payable 10000 Purchased inventory 7000 paid in cash Cash 7000 Cash Outflow Inventory 7000 Paid 3000 for interest Cash 3000 Cash Outflow Interest Expense 3000 Received 5000 from a new shortterm loan Cash 5000 Cash Inflow ShortTerm Loan 5000 Paid 1000 for taxes Cash 1000 Cash Outflow Taxes Expense 1000 Additional Investment of 15000 by the owner Cash 15000 Cash Inflow Mr A Capital 15000 Purchased equipment 20000 paid in cash Cash 20000 Cash Outflow Equipment 20000 Step 2 Prepare the Statement of Cash Flow This statement categorizes cash flows into operating investing and financing activities ABC Sole Proprietorship Statement of Cash Flow For the Year Ended December 31 2023 Cash Flows from Operating Activities Cash Received from Customers 25000 Cash Paid to Suppliers Accounts Payable 10000 Cash Paid for Interest 3000 Cash Paid for Taxes 1000 Net Cash from Operating Activities 11000 Cash Flows from Investing Activities Purchase of Equipment 20000 Net Cash from Investing Activities 20000 Cash Flows from Financing Activities Proceeds from ShortTerm Loan 5000 Owners Investment 15000 Net Cash from Financing Activities 20000 Net Increase in Cash 11000 20000 20000 11000 Beginning Cash Balance 112023 50000 Given Ending Cash Balance 12312023 50000 11000 61000 Step 3 Prepare the Statement of Financial Performance Income Statement This statement calculates the net income for the period ABC Sole Proprietorship Statement of Financial Performance For the Year Ended December 31 2023 Revenue 25000 Cash received from customers Expenses Interest Expense 3000 Taxes Expense 1000 Total Expenses 4000 Net Income 25000 4000 21000 Step 4 Prepare the Statement of Financial Position Balance Sheet This statement shows the companys assets liabilities and equity at the end of the period ABC Sole Proprietorship Statement of Financial Position As of December 31 2023 Assets Cash 61000 Calculated in Cash Flow Statement Accounts Receivable 0 15000 25000 10000 Inventory 7000 Prepaid Expenses 12000 Given Building 40000 Given Accumulated Depreciation Building 24000 Given Equipment 40000 20000 20000 Accumulated Depreciation Equipment 10000 Given Total Assets 126000 Liabilities Accounts Payable 0 10000 10000 ShortTerm Loan 5000 Total Liabilities 5000 Equity Mr A Capital Beginning 90000 Given Add Net Income 21000 From Income Statement Add Additional Investment 15000 Total Equity 126000 Total Liabilities and Equity 126000 Step 5 Prepare the Statement of Changes in Equity This statement shows how the owners equity has changed during the period ABC Sole Proprietorship Statement of Changes in Equity For the Year Ended December 31 2023 Mr A Capital January 1 2023 90000 Add Net Income 21000 Add Additional Investment 15000 Mr A Capital December 31 2023 126000 Important Notes Accuracy Doublecheck all calculations to ensure accuracy Assumptions Some assumptions were made eg Accounts Receivable being collected on account Clarify any ambiguities with the instructor Presentation Ensure the statements are properly formatted and labeled Let me know if you would like any clarification or have any other questions