E4.6 (LO 2, 3) (Income Statement Items) The following balances were taken from the books of Parnevik ASA on December 31, 2022. € 86,000 Accumulated depreciation-buildings € 28,000 155,000 Interest revenue Cash 51,000 Notes receivable 194,000 1,280,000 Selling expenses 150,000 Accounts payable Sales revenue Accounts receivable 170,000 100,000 Prepaid insurance 20,000 Bonds payable 150,000 Administrative and general expenses 7,000 Accrued liabilities Sales returns and allowances 97,000 Allowance for doubtful accounts 32,000 Sales discounts 45,000 Interest expense 60,000 Land 100,000 Notes payable 100,000 Equipment 200,000 Loss on impairment of plant assets 120,000 140,000 Share capital-ordinary 621,000 Retained earnings Buildings 500,000 Cost of goods sold 21,000 Accumulated depreciation- eqlipment 40,000 Assume the total effective tax rate on all items is 34%. Instructions Prepare an income statement; 100,000 ordinary shares were outstanding during the year.
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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