Alan, a sole trader, has the following trial balance as at 31 December 2020: Accounts Debit (RM) Credit (RM) Capital 121,050 Drawings 8,000 Cash at bank 3,000 Cash in hand 400 Accounts payable 12,000 Accounts receivable 30,000 Inventory as at 1 January 2020 23,000 Motor vehicle 40,000 Office equipment 60,000 Sales 130,000 Accumulated depreciation- Motor vehicle 8,000 Accumulated depreciation - Office equipment 12,000 Provision for doubtful debts 5,000 Purchases 90,000 Returns 600 300 Carriage inwards 300 Motor running expenses 1,000 Rent expenses 20,000 Telephone charges 400 Wages and salaries expenses 12,000 Insurance expenses 3,000 Postage and stamps expenses 100 Office expenses 1,300 Sundry expenses 300 Dividend income 2,000 Interest income 3,000 Discount 200 250 Total 293,600 293,600 Additional information: i) Closing inventory was valued at RM30,000. ii) Wages and salaries are accrued by RM140. iii) Prepaid rent at 31 December 2020 is RM1,000. iv) Motor running expenses are accrued by RM200. v) Increase in the provision for doubtful debts by RM200. vi) Depreciation is yet to be provided for the year. All non-current assets are to be depreciated by 10% on cost based on the balance of its account on 31 December 2020. You are required to prepare the following financial statements: Statement of Comprehensive Income for the year ended 31 December 2020. Statement of Financial Position as at 31 December 2020 (show working capital calculation).
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.
Alan, a sole trader, has the following
|
Accounts |
Debit (RM) |
Credit (RM) |
|
Capital |
|
121,050 |
|
Drawings |
8,000 |
|
|
Cash at bank |
3,000 |
|
|
Cash in hand |
400 |
|
|
Accounts payable |
|
12,000 |
|
|
30,000 |
|
|
Inventory as at 1 January 2020 |
23,000 |
|
|
Motor vehicle |
40,000 |
|
|
Office equipment |
60,000 |
|
|
Sales |
|
130,000 |
|
Accumulated |
|
8,000 |
|
Accumulated depreciation - Office equipment |
|
12,000 |
|
Provision for doubtful debts |
|
5,000 |
|
Purchases |
90,000 |
|
|
Returns |
600 |
300 |
|
Carriage inwards |
300 |
|
|
Motor running expenses |
1,000 |
|
|
Rent expenses |
20,000 |
|
|
Telephone charges |
400 |
|
|
Wages and salaries expenses |
12,000 |
|
|
Insurance expenses |
3,000 |
|
|
Postage and stamps expenses |
100 |
|
|
Office expenses |
1,300 |
|
|
Sundry expenses |
300 |
|
|
Dividend income |
|
2,000 |
|
Interest income |
|
3,000 |
|
Discount |
200 |
250 |
|
Total |
293,600 |
293,600 |
Additional information:
- i) Closing inventory was valued at RM30,000.
- ii) Wages and salaries are accrued by RM140.
iii) Prepaid rent at 31 December 2020 is RM1,000.
- iv) Motor running expenses are accrued by RM200.
- v) Increase in the provision for doubtful debts by RM200.
- vi) Depreciation is yet to be provided for the year. All non-current assets are to be depreciated by 10% on cost based on the balance of its account on 31 December 2020.
You are required to prepare the following financial statements:
- Statement of Comprehensive Income for the year ended 31 December 2020.
Statement of Financial Position as at 31 December 2020 (showworking capital calculation).
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