On March 31, the following data were accumulated to assist the accountant in preparing the adjusting entries for Potomac Realty: • The supplies account balance on March 31 is $5,620, the supplies on hand on March 31 are $1,290. • The unearned rent account balance on March 31 is $5,000 representing the receipt of an advance payment on March 1 of four months’ rent from tenants. • Wages accrued but not paid at March 31 are $2,290. • Fees accrued but unbilled at March 31 are $16,825. • Depreciation of office equipment is $4,600. Required: 1. Journalize the adjusting entries required at March 31. Refer to the Chart of Accounts for exact wording of account titles. 2. What is the difference between adjusting entries and correcting entries?
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 supplies account balance on March 31 is $5,620, the supplies on hand on March 31 are $1,290. |
| • | The unearned rent account balance on March 31 is $5,000 representing the receipt of an advance payment on March 1 of four months’ rent from tenants. |
| • | Wages accrued but not paid at March 31 are $2,290. |
| • | Fees accrued but unbilled at March 31 are $16,825. |
| • |
| Required: | |
| 1. | Journalize the adjusting entries required at March 31. Refer to the Chart of Accounts for exact wording of account titles. |
| 2. | What is the difference between adjusting entries and correcting entries? |
CHART OF ACCOUNTSPotomac RealtyGeneral Ledger
| ASSETS | |
| 11 | Cash |
| 12 | Accounts Receivable |
| 13 | Supplies |
| 14 | Prepaid Insurance |
| 15 | Land |
| 16 | Office Equipment |
| 17 |
| LIABILITIES | |
| 21 | Accounts Payable |
| 22 | Unearned Rent |
| 23 | Wages Payable |
| 24 | Taxes Payable |
| EQUITY | |
| 31 | Common Stock |
| 32 | |
| 33 | Dividends |
| REVENUE | |
| 41 | Fees Earned |
| 42 | Rent Revenue |
| EXPENSES | |
| 51 | Advertising Expense |
| 52 | Insurance Expense |
| 53 | Rent Expense |
| 54 | Wages Expense |
| 55 | Supplies Expense |
| 56 | Utilities Expense |
| 57 | Depreciation Expense |
| 59 | Miscellaneous Expense |
Step 1
Journal is the part of book keeping.
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