Directions: Please prepare journal entries for all transactions starting with March 1. Peaceful Existence, Inc. is a consulting company established by Lola Guthrie. On March 1, the company was started with a $450,000 investment by the owner in exchange for common stock. During the month of March, the company engaged in the following transactions: • Mar 2, the company purchased $30,650 of office supplies on account from Staples. The office supplies are expected to last one-year. • Mar 3, performed a consulting job and billed the customer $90,000. • Mar 4, the company paid $225,000 for a two-year insurance policy. • Mar 5, the company received $50,000 cash in advance to perform a consulting job on Mar 25th • Mar 5, purchased $65,000 of office equipment by paying $5,000 cash and signing a note payable for the balance. Straight-line depreciation is used for the equipment, and the equipment is expected to last 5 years with zero salvage value. At the end of the month, the owner had the below adjustments: • Mar 31, adjusted the office supplies account to reflect $25,000 of supplies on hand. • Mar 31, adjusted the prepaid insurance account to reflect that one month's of insurance had expired. • Mar 31, adjusted the unearned revenue account to reflect that the unearned revenue received on Mar 5th had been earned. • Mar 31, recorded one-month depreciation on the equipment. • Mar 31, is a Thursday and the employees are paid on Friday. The owner has five employees who are each paid $300 per day for a 5-day work week. In addition to the above adjusting journal entries, the company also recorded the following transactions: • Mar 31, paid in full the amount due to Staples for the office supplies purchased on Mar 2. • Mar 31, collected in full the amount due from the customer billed on Mar 3.
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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