The following is the receipts and payments account of the Friendship Club for the year ended 31 December 2020: K’000 K’000 Balance at bank 31 December 2019 112 Bar purchases 4,877 Entrance fees 46 Wages 458 Subscriptions: 2019 28 Rent 205 2020 336 Heating and lighting 141 2021 39 Postage and stationery 36 Bar Sales 5,750 Insurance 20 Sale of investments 825 General expenses 51 Payments on account of new furniture 495 Balance at bank, - 31 December 2017 853 7,136 7,136 The following information is also supplied: (1) 31 December 2019 31 December 2020 K K Bar inventory, at cost 300 347 Payables for bar purchases 337 394 Rent due 20 40 Heating and lighting expenses due 18 21 Subscriptions due 28 44 Insurance paid in advance 6 8 2) On 31 December 2019, the club held investments which cost K550. During the year ended 31 December 2020, these were sold for K825. 3) Furniture was valued at K330 on 31 December 2019. On June 2020, the club purchased additional furniture at a cost of K572. Depreciation of all furniture is to be provided for at the rate of 10% per annum. Required: (a) Prepare an income and expenditure account for the year ended 31 December 2020. (b) Prepare a statement of financial position as at 31 December 2020.
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 following is the receipts and payments account of the Friendship Club for the year ended 31 December 2020:
|
|
K’000 |
|
K’000 |
|
Balance at bank |
|
|
|
|
31 December 2019 |
112 |
Bar purchases |
4,877 |
|
Entrance fees |
46 |
Wages |
458 |
|
Subscriptions: 2019 |
28 |
Rent |
205 |
|
2020 |
336 |
Heating and lighting |
141 |
|
2021 |
39 |
Postage and stationery |
36 |
|
Bar Sales |
5,750 |
Insurance |
20 |
|
Sale of investments |
825 |
General expenses |
51 |
|
|
|
Payments on account of new furniture |
495 |
|
|
|
Balance at bank, |
- |
|
|
|
31 December 2017 |
853 |
|
|
7,136 |
|
7,136 |
The following information is also supplied:
|
(1) |
31 December 2019 |
31 December 2020 |
|
|
K |
K |
|
Bar inventory, at cost |
300 |
347 |
|
Payables for bar purchases |
337 |
394 |
|
Rent due |
20 |
40 |
|
Heating and lighting expenses due |
18 |
21 |
|
Subscriptions due |
28 |
44 |
|
Insurance paid in advance |
6 |
8 |
2) On 31 December 2019, the club held investments which cost K550. During the year ended 31 December 2020, these were sold for K825.
3) Furniture was valued at K330 on 31 December 2019. On June 2020, the club purchased additional furniture at a cost of K572.
Required:
(a) Prepare an income and expenditure account for the year ended 31 December 2020.
(b) Prepare a
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