Ledger Accounts, Adjusting Entries, Financial Statements, and Closing Entries; Optional Spreadsheet. The unadjusted trial balance of Recessive Interiors at January 31, 2016, the end of the year, follows: Recessive Interiors Unadjusted Trial Balance January 31, 2016 Debit Balances Credit Balances Cash 13,100 Supplies 8,000 Prepaid Insurance 7,500 Equipment 113,000 Accumulated Depreciation-Equipment 12,000 Trucks 90,000 Accumulated Depreciation-Trucks 27,100 Accounts Payable 4,500 Jeanne McQuay, Capital 126,400 Jeanne McQuay, Drawing 3,000 Service Revenue 155,000 Wages Expense 72,000 Rent Expense 7,600 Truck Expense 5,350 Miscellaneous Expense 5,450 325,000 325,000
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.
The following additional accounts from Recessive Interiors' chart of accounts should be used: Wages Payable, 22; Income Summary, 33;
The data needed to determine year-end adjustments are as follows:
- Supplies on hand at January 31 are $2,850.
- Insurance premiums expired during the year are $3,150.
- Depreciation of equipment during the year is $5,250.
- Depreciation of trucks during the year is $4,000.
- Wages accrued but not paid at January 31 are $900.
Required:
1. Prepare an income statement.
2. Prepare a Statement of Owner's Equity (no additional investments were made during the year.)
3. Prepare a balance sheet.
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