Angela Lopez owns and manages a consulting firm called Metrix, which began operations on December 1. On December 31, Metrix shows the following selected accounts and amounts for the month of December. Cash $ 11,400 Common stock $ 18,400 Accounts receivable 5,200 Dividends 3,700 Notes receivable 4,200 Consulting revenue 20,500 Office supplies 3,200 Rental revenue 2,200 Prepaid insurance 2,700 Salaries expense 4,700 Equipment 12,500 Rent expense 3,700 Accounts payable 6,740 Advertising expense 740 Notes payable 4,100 Utilities expense 540 Unearned revenue 640 Required: 1. Prepare a December income statement for the business. 2. Prepare a December statement of retained earnings. The Retained Earnings account balance at December 1 was $0. 3. Prepare a December 31 balance sheet. Hint: Use the Retained Earnings account balance calculated in part 2.
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.
Angela Lopez owns and manages a consulting firm called Metrix, which began operations on December 1. On December 31, Metrix shows the following selected accounts and amounts for the month of December.
| Cash | $ 11,400 | Common stock | $ 18,400 |
| 5,200 | Dividends | 3,700 | |
| Notes receivable | 4,200 | Consulting revenue | 20,500 |
| Office supplies | 3,200 | Rental revenue | 2,200 |
| Prepaid insurance | 2,700 | Salaries expense | 4,700 |
| Equipment | 12,500 | Rent expense | 3,700 |
| Accounts payable | 6,740 | Advertising expense | 740 |
| Notes payable | 4,100 | Utilities expense | 540 |
| Unearned revenue | 640 |
Required:
1. Prepare a December income statement for the business.
2. Prepare a December statement of
3. Prepare a December 31 balance sheet. Hint: Use the Retained Earnings account balance calculated in part 2.
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