The trial balance of Novak Ltd. at December 31, 2020, follows: Debits Credits Cash $295,000 Sales revenue $10,299,000 FV-NI investments (at fair value) 323,000 Cost of goods sold 6,400,000 Bond investment at amortized cost 429,000 FV—OCI investments (fair value $445,000) 378,000 Notes payable (due in six months) 99,000 Accounts payable 805,000 Selling expenses 2,460,000 Investment income or loss* 11,000 Land 320,000 Buildings 2,940,000 Dividends payable 56,000 Income tax payable 106,000 Accounts receivable 705,000 Accumulated depreciation—buildings 232,000 Allowance for doubtful accounts 37,000 Administrative expenses 930,000 Interest expense 251,000 Inventory 767,000 Gain on disposal of land 60,000 Dividends 50,000 Notes payable (due in five years) 930,000 Equipment 770,000 Bonds payable (due in three years) 3,000,000 Accumulated depreciation—equipment 61,000 Intangible assets—franchises (net) 250,000 Common shares 969,000 Intangible assets—patents (net) 225,000 Retained earnings 731,000 Accumulated other comprehensive income 97,000 Totals $17,493,000 $17,493,000 * The investment income or loss relates to the FV-NI investments. (a) Prepare a classified statement of financial position as at December 31, 2020. Ignore income taxes. (List Current Assets in order of liquidity. List Property, Plant and Equipment in order of Land, Buildings and Equipment.)
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
| Debits | Credits | |||||
|---|---|---|---|---|---|---|
|
Cash |
$295,000 | |||||
|
Sales revenue |
$10,299,000 | |||||
|
FV-NI investments (at fair value) |
323,000 | |||||
|
Cost of goods sold |
6,400,000 | |||||
|
Bond investment at amortized cost |
429,000 | |||||
|
FV—OCI investments (fair value $445,000) |
378,000 | |||||
|
Notes payable (due in six months) |
99,000 | |||||
|
Accounts payable |
805,000 | |||||
|
Selling expenses |
2,460,000 | |||||
|
Investment income or loss* |
11,000 | |||||
|
Land |
320,000 | |||||
|
Buildings |
2,940,000 | |||||
|
Dividends payable |
56,000 | |||||
|
Income tax payable |
106,000 | |||||
|
|
705,000 | |||||
|
Accumulated |
232,000 | |||||
|
Allowance for doubtful accounts |
37,000 | |||||
|
Administrative expenses |
930,000 | |||||
|
Interest expense |
251,000 | |||||
|
Inventory |
767,000 | |||||
|
Gain on disposal of land |
60,000 | |||||
|
Dividends |
50,000 | |||||
|
Notes payable (due in five years) |
930,000 | |||||
|
Equipment |
770,000 | |||||
|
Bonds payable (due in three years) |
3,000,000 | |||||
|
Accumulated depreciation—equipment |
61,000 | |||||
|
Intangible assets—franchises (net) |
250,000 | |||||
|
Common shares |
969,000 | |||||
|
Intangible assets—patents (net) |
225,000 | |||||
|
|
731,000 | |||||
|
Accumulated other comprehensive income |
97,000 | |||||
|
Totals |
$17,493,000 | $17,493,000 |
* The investment income or loss relates to the FV-NI investments.
(a)
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