DEF Merchandising follows the policy of recording prepayments in revenue and expense accounts and reverses appropriate adjusting entries at the beginning of the new accounting period. The record of the business show the following: a. On September 1, 2014, DEF borrowed P2,000,000 cash from the Bank of the Philippines by issuing a 6% note payable in one year. The interest is payable upon maturity of the note. b. On February 1, 2014, DEF paid insurance premium of P72,000 covering a period of three years beginning on this date. c. On December 1, 2014, DEF paid P360,000 representing the rental for one year starting on this date. d. DEF reports accounts receivable of P1,500,000 and allowance for uncollectible accounts of P10,000 (debit balance); P50,000 of the receivables are uncollectible e. DEF pays all employees every Friday. The total payroll for the five-day workweek ending January 3, 2015 is P450,000 f. DEF purchased office equipment on August 1, 2014 amounting to P120,000. On January 1, 2014, the office equipment account has a balance of P480,000. All equipment have. estimated useful life of 5 years with no residual value. g. Office supplies on hand on January 1, 2014 amounted to P5,000. During this year, office supplies of P12,500 were purchased. On December 31, 2014, there are unused supplies of P4,500. h. DEF subleases part of its office space for P30,000 per month. On November 1, 2014, it received rental payments for six months starting on this date. į. Merchandise inventory on January 1 and December 31 amounted to P180,0000 and P220,000, respectively.
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
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