As at 30 June 2019, the unadjusted trial balance of Green Ltd was noted as follows: Green Ltd TRIAL BALANCE AS AT 30 JUNE 2019 Accounts Debit ($) Credit ($) Cash at bank 8 985 Account receivables 31 200 Prepaid insurance 3 900 Office Supplies 4 680 Office equipment 14 100 Accumulated depreciation - equipment 2 850 Accounts payable 315 Salary payable Unearned service revenue 1 230 Loan payable 10 500 Capital 33 300 Drawings 60 000 Service revenue 159 270 Salary expenses 66 000 Depreciation expenses - equipment Miscellaneous expenses 18 600 TOTAL 207 465 207 465 The following additional information is available at the end of June for adjustments: A physical count of office supplies on 30 June shows $660 of unused supplies on hand Depreciation of the office equipment is 10% each year (straight line method is used) Of the $1230 unearned service revenue, $300 is still unearned Of prepaid insurance, 60% expired this period Salaries owed but not yet paid $1920 Provided consultancy service of $2000 on credit. This was not recorded for the month. Required: Prepare adjusting entries at the end of 30 June, 2019. Calculate the balance of the total revenue of the company after adjustment. Explain why accrual accounting adjustments are required?
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.
As at 30 June 2019, the unadjusted
Green Ltd
TRIAL BALANCE
AS AT 30 JUNE 2019
|
Accounts |
Debit ($) |
Credit ($) |
|
Cash at bank |
8 985 |
|
|
|
31 200 |
|
|
Prepaid insurance |
3 900 |
|
|
Office Supplies |
4 680 |
|
|
Office equipment |
14 100 |
|
|
|
|
2 850 |
|
Accounts payable |
|
315 |
|
Salary payable |
|
|
|
Unearned service revenue |
|
1 230 |
|
Loan payable |
|
10 500 |
|
Capital |
|
33 300 |
|
Drawings |
60 000 |
|
|
Service revenue |
|
159 270 |
|
Salary expenses |
66 000 |
|
|
Depreciation expenses - equipment |
|
|
|
Miscellaneous expenses |
18 600 |
|
|
TOTAL |
207 465 |
207 465 |
The following additional information is available at the end of June for adjustments:
- A physical count of office supplies on 30 June shows $660 of unused supplies on hand
- Depreciation of the office equipment is 10% each year (
straight line method is used) - Of the $1230 unearned service revenue, $300 is still unearned
- Of prepaid insurance, 60% expired this period
- Salaries owed but not yet paid $1920
- Provided consultancy service of $2000 on credit. This was not recorded for the month.
Required:
- Prepare
adjusting entries at the end of 30 June, 2019. - Calculate the balance of the total revenue of the company after adjustment.
- Explain why accrual accounting adjustments are required?
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