Pitman Company is a small editorial services company owned and operated by Jan Pitman. On October 31, 2019 the end of the current year, Pitman Company’s accounting clerk prepared the following unadjusted trial balance: Pitman Company UNADJUSTED TRIAL BALANCE October 31, 2019 ACCOUNT TITLE DEBIT CREDIT 1 Cash 7,500.00 2 Accounts Receivable 38,400.00 3 Prepaid Insurance 7,200.00 4 Supplies 1,980.00 5 Land 112,500.00 6 Building 300,250.00 7 Accumulated Depreciation-Building 87,550.00 8 Equipment 135,300.00 9 Accumulated Depreciation-Equipment 97,950.00 10 Accounts Payable 12,150.00 11 Unearned Rent 6,750.00 12 Jan Pitman, Capital 371,000.00 13 Jan Pitman, Drawing 15,000.00 14 Fees Earned 324,600.00 15 Salaries and Wages Expense 193,370.00 16 Utilities Expense 42,375.00 17 Advertising Expense 22,800.00 18 Repairs Expense 17,250.00 19 Miscellaneous Expense 6,075.00 20 Totals 900,000.00 900,000.00 The data needed to determine year-end adjustments are as follows: a. Unexpired insurance at October 31, $600. b. Supplies on hand at October 31, $675. c. Depreciation of building for the year, $12,000. d. Depreciation of equipment for the year, $8,600. e. Unearned rent at October 31, $2,250. f. Accrued salaries and wages at October 31, $2,800. g. Fees earned but unbilled on October 31, $10,050. Required: 1. Journalize the adjusting entries using the following additional accounts: Salaries and Wages Payable, Rent Revenue, Insurance Expense, Depreciation Expense—Building, Depreciation Expense—Equipment and Supplies Expense. Refer to the Chart of Accounts for exact wording of account titles. 2. Determine the balances of the accounts affected by the adjusting entries, and prepare an adjusted trial balance.
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.
| ACCOUNT TITLE | DEBIT | CREDIT | |
|---|---|---|---|
|
1
|
Cash
|
7,500.00
|
|
|
2
|
|
38,400.00
|
|
|
3
|
Prepaid Insurance
|
7,200.00
|
|
|
4
|
Supplies
|
1,980.00
|
|
|
5
|
Land
|
112,500.00
|
|
|
6
|
Building
|
300,250.00
|
|
|
7
|
|
|
87,550.00
|
|
8
|
Equipment
|
135,300.00
|
|
|
9
|
Accumulated Depreciation-Equipment
|
|
97,950.00
|
|
10
|
Accounts Payable
|
|
12,150.00
|
|
11
|
Unearned Rent
|
|
6,750.00
|
|
12
|
Jan Pitman, Capital
|
|
371,000.00
|
|
13
|
Jan Pitman, Drawing
|
15,000.00
|
|
|
14
|
Fees Earned
|
|
324,600.00
|
|
15
|
Salaries and Wages Expense
|
193,370.00
|
|
|
16
|
Utilities Expense
|
42,375.00
|
|
|
17
|
Advertising Expense
|
22,800.00
|
|
|
18
|
Repairs Expense
|
17,250.00
|
|
|
19
|
Miscellaneous Expense
|
6,075.00
|
|
|
20
|
Totals
|
900,000.00
|
900,000.00
|
| a. | Unexpired insurance at October 31, $600. |
| b. | Supplies on hand at October 31, $675. |
| c. | Depreciation of building for the year, $12,000. |
| d. | Depreciation of equipment for the year, $8,600. |
| e. | Unearned rent at October 31, $2,250. |
| f. | Accrued salaries and wages at October 31, $2,800. |
| g. | Fees earned but unbilled on October 31, $10,050. |
| Required: | |
| 1. | Journalize the |
| 2. | Determine the balances of the accounts affected by the adjusting entries, and prepare an adjusted trial balance. |
Introduction:
Journals:
Recording of a business transactions in a chronological order.
First step in the preparation of final accounts is recording journals.
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