Gurkha sells carpets from several retail outlets. In previous years the company has undertaken for fitting the carpets in customers' premises. Customers pay for the carpets at the time they are ordered. The average length of time from a customer ordering a carpet to its fitting is 15 days. In previous years, Gurkha had not recognized a sale in income until the carpet had been successfully fitted as the rectification costs of any fitting error would be expensive. From 1 April 2015 Gurkha changed its method of trading by sub-contracting the fitting to approved contractors. Under this policy the sub-contractors are paid by Gurkha and they (the subcontractors) are liable for any errors made in the fitting. Because of this Gurkha is proposing to recognize sales when customers order and pay for the goods, rather than when they have been fitted. Details of the relevant sales figures are: Sales made in retail outlets for the year to 31 March 2016 Sales value of carpets fitted in the 15 days to 15 April 2015 Sales value of carpets fitted in the 15 days to 15 April 2016 P23,000,000 1,200,000 1,600,000 Note: the sales value of carpets fitted in the 15 days to 15 April 2015 are not included in the annual sales figure of P23 million, but those for the 15 days to 15 April 2016 are included. Calculate the amount that would be included in sales revenue for carpets in the year ended 31 March 2016. a. P23,000,000 b. P24,200,000 c. P22,600,000 d. P21,400,000
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.
Step by step
Solved in 2 steps
