The general ledger of Red Storm Cleaners at January 1, 2021, includes the following account balances:Accounts Debits CreditsCash $20,000Accounts Receivable 8,000Supplies 4,000Equipment 15,000Accumulated Depreciation $ 5,000Salaries Payable 7,500Common Stock 25,000Retained Earnings 9,500Totals $47,000 $47,000The following is a summary of the transactions for the year:1. March 12 Provide services to customers, $60,000, of which $21,000 is on account.2. May 2 Collect on accounts receivable, $18,000.3. June 30 Issue shares of common stock in exchange for $6,000 cash.4. August 1 Pay salaries of $7,500 from 2020 (prior year).5. September 25 Pay repairs and maintenance expenses, $13,000.6. October 19 Purchase equipment for $8,000 cash.7. December 30 Pay $1,100 cash dividends to stockholders.Required:1. Set up the necessary T-accounts and enter the beginning balances from the trial balance. In addition to the accounts shown, the company also has accounts for Dividends, Service Revenue, Salaries Expense, Repairs and Maintenance Expense, Depreciation Expense, and Supplies Expense.2. Record each of the summary transactions listed above.3. Post the transactions to the accounts.4. Prepare an unadjusted trial balance.5. Record adjusting entries. Accrued salaries at year-end amounted to $19,600. Depreciation for the year on the equipment is $5,000. Office supplies remaining on hand at the end of the year equal $1,200.6. Post adjusting entries.7. Prepare an adjusted trial balance.8. Prepare an income statement for 2021 and a classified balance sheet as of December 31, 2021.9. Record closing entries.10. Post closing entries.11. Prepare a post-closing 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.
The general ledger of Red Storm Cleaners at January 1, 2021, includes the following account balances:
Accounts Debits Credits
Cash $20,000
Supplies 4,000
Equipment 15,000
Accumulated
Salaries Payable 7,500
Common Stock 25,000
Retained Earnings 9,500
Totals $47,000 $47,000
The following is a summary of the transactions for the year:
1. March 12 Provide services to customers, $60,000, of which $21,000 is on account.
2. May 2 Collect on accounts receivable, $18,000.
3. June 30 Issue shares of common stock in exchange for $6,000 cash.
4. August 1 Pay salaries of $7,500 from 2020 (prior year).
5. September 25 Pay repairs and maintenance expenses, $13,000.
6. October 19 Purchase equipment for $8,000 cash.
7. December 30 Pay $1,100 cash dividends to stockholders.
Required:
1. Set up the necessary T-accounts and enter the beginning balances from the
2. Record each of the summary transactions listed above.
3.
4. Prepare an unadjusted trial balance.
5. Record
6. Post adjusting entries.
7. Prepare an adjusted trial balance.
8. Prepare an income statement for 2021 and a classified balance sheet as of December 31, 2021.
9. Record closing entries.
10. Post closing entries.
11. Prepare a post-closing trial balance.
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