Ali Inc. is a manufacturer of custom furniture, which was incorporated on January 3, 2019. The following transactions nappened during the year ended December 31, 2019. 1 On January 3rd, the owner invested $750,000 to start the business. On January 3rd, Ali signed a two-year lease contract to rent a building which will be used as the main manufacturing facility. The first and last month rent was paid in advance on Jan 3rd. Monthly rent is $5,00 2 On March 1, Ali purchased manufacturing equipment at a cost of $200,000. Ali paid $50,000 in cash and t rest will be paid next year. The equipment has a useful life of 8 years and $5,000 residual value. The compar uses double declining balance method of depreciation. On April 1, Ali borrowed $350,000 from a bank. The loan is a 4-year with 4% interest rate. The interest is 4 payable on the first day of each month, beginning May 1st. On April 15, Ali purchased inventory of $150,000 from suppliers on account and is charged 13% harmoniz 5 sales tax. On May 1, Ali received an order to build custom furniture for a customer. The customer paid $20,000 in 6. advance. The furniture was delivered at the end of December 2019. The cost of making the furniture was $8,000. The company uses a perpetual inventory system. Ignore HST for this sale. 7 The following expenses were paid during the year. Salaries and wages expense Rent expense Interest expense
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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