s of Office
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.
Double Entry/
Jan 1 – $50,000 cash was acquired in exchange for common stock.
Mar 1 – $8,400 cash was paid for two years of Office Rent
Apr 14 – $800 worth of supplies were purchased on account.
Jun 30 – $12,000 cash was received in advance for services to be provided over the next 12 months.
Aug 1 – We billed a customer $5,000 for work that we completed in July
Aug 8 – $1,600 was received for work that we completed.
Sept 1 – $20,000 cash was used to pay employees’ salaries
Sept 9 – $4,250 cash was received for services that we billed for previously.
Oct 5 – We billed multiple customers a total of $19,000 for services we provided.
Nov 2 – Stockholders were paid $500 cash dividend.
Dec 31 –
1) We need to recognize the services provided that were contracted on June 30th.
2) Accrued Salaries – we need to record a total of $1,100.
3) In March, we prepaid our rent, we need to recognize the rent expense for the year.
4) We physically counted supplies and come to find out, we only have $50 worth of supplies on hand, so we need to record what was used up during the year.
REQUIRED
a) Record the above transactions in the general journal.
b) Not required: may be helpful –
c) Prepare a
d) Prepare the Income Statement, Statement of Changes in
e) Prepare the closing entries as of December 31st.
f) Prepare a Post-Closing Trial Balance after the closing entries are posted.
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