PA4-4 (Algo) Identifying and Preparing Adjusting Journal Entries [LO 4-1, LO 4-2, LO 4-3, LO 4-6] [The following information applies to the questions displayed below.] Val's Hair Emporium operates a hair salon. Its unadjusted trial balance as of December 31, 2021, follows, along with information about selected accounts. Account Names Cash Credit Debit $ 3,500 Further Information As reported on December 31 bank statement. Supplies 4,000 Based on count, only $1,150 of supplies still exist. Prepaid Rent 5,100 This amount was paid November 1 for rent through the end of January. Accounts Payable $ 1,350 This represents the total amount of bills received for supplies and utilities through December 15. Val estimates that the company has received $420 of utility services through December 31 for which it has not yet been billed. Salaries and Wages Payable Stylists have not yet been paid $200 for their work on December 31. Income Tax Payable 0 The company has paid last year's income taxes but not this year's taxes. Common Stock 1,700 This amount was contributed for common stock in prior years. 800 Retained Earnings This is the balance reported at the end of last year. Service Revenue 70,950 Customers pay cash when they receive services. Salaries and Wages Expense Utilities Expense Rent Expense Supplies Expense Income Tax Expense Totals 28,800 11,900 17,000 4,500 0 $ 74,800 $ 74,800 This is the cost of stylist wages through December 30. This is the cost of utilities through December 15. This year's rent was $1,700 per month. This is the cost of supplies used through November 30. The company has an average tax rate of 25%.
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.
![PA4-4 (Algo) Identifying and Preparing Adjusting Journal Entries [LO 4-1, LO 4-2, LO 4-3, LO 4-6]
[The following information applies to the questions displayed below.]
Val's Hair Emporium operates a hair salon. Its unadjusted trial balance as of December 31, 2021, follows, along with
information about selected accounts.
Account Names
Credit
Debit
$ 3,500
Further Information
Cash
As reported on December 31 bank
statement.
Supplies
4,000
Based on count, only $1,150 of supplies
still exist.
Prepaid Rent
5,100
This amount was paid November 1 for rent
through the end of January.
Accounts Payable
$ 1,350 This represents the total amount of bills
received for supplies and utilities
through December 15. Val estimates that
the company has received $420 of utility
services through December 31 for which it
has not yet been billed.
Salaries and Wages Payable
0
Stylists have not yet been paid $200 for
their work on December 31.
Income Tax Payable
0
The company has paid last year's income
taxes but not this year's taxes.
Common Stock
1,700
This amount was contributed for common
stock in prior years.
Retained Earnings
800
This is the balance reported at the end
of last year.
Service Revenue
70,950
Customers pay cash when they receive
services.
Salaries and Wages Expense
This is the cost of stylist wages through
December 30.
Utilities Expense
This is the cost of utilities through.
December 15.
Rent Expense
This year's rent was $1,700 per month.
This is the cost of supplies used through
November 30.
Supplies Expense
Income Tax Expense
The company has an average tax rate of
25%.
Totals
28,800
11,900
17,000
4,500
0
$74,800
$74,800
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