Specific Category of Adjusting Entry Accounts on the Specific Category of Accounts on the Over / Understated Income Statement Understated Over / Item Needed? Balance Sheet (a) Over Under Under Yes Revenue Liability Equity
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.
Identifying the impact of
Austin Acoustics recorded the following transactions during October:
a. Received $2,300 cash from customer tor three months of service beginning October 1 and ending December 31. The company recorded a $2,500 debit to Cash and a $2,500 credit to Unearned Revenue.
b. Employees are paid $3,000 on Monday following the five-day workweek. October 31 is on Friday.
c. The company pays $440 on October 1 for its six-month auto insurance policy. The company recorded a $440 debit to Prepaid Insurance and a $440 credit to Cash.
d. The company purchased office furniture for $8,300 on January 2. The company recorded a $8,300 debit to Office Furniture and an $8,300 credit to Accounts Payable. Annual
e. The company began October with $50 of office supplies on hand. On October 10, the company purchased office supplies on account of $100. The company recorded a $100 debit to Office Supplies and a $100 credit to Accounts Payable. The company used $120 of office supplies during October.
f. The company received its electric bill on October 31 for $325 but did not pay it until November 10.
g. The company paid November’s rent of $2,500 on October 30. On October 30, the company recorded an $2,500 debit to Rent Expense and a $2,500 credit to Cash.
Indicate if an adjusting entry is needed for each item on October 31 for the month of October. Assuming the adjusting entry is not made, indicate which specific category or categories of accounts on the financial statements are misstated and if they are overstated or understated. Use the following table as a guide. Item a is completed as an example:
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