Willow Deng is the sole owner of Spinnaker Pty Ltd, a private company selling sailing accessories in Adelaide. He has been experiencing tremendous growth in his business in recent years. He has approached Best Accounting Solutions Pty Ltd to help develop improved accounting systems for his business. Assume you are a graduate accountant working for Best Accounting Solutions Pty Ltd and you are required to prepare the year-end Balance Day Adjustments Journals for Spinnaker Pty Ltd. SPINNAKER PTY LTD UNADJUSTED TRIAL BALANCE AS AT 30 JUNE 2020 Debit ($) Credit ($) Cash at Bank 90,700 Accounts Receivable 60,000 Inventory (30 June 2020) 48,845 Prepaid Insurance 6,000 Supplies 5,600 Office Equipment 80,000 Accumulated Depreciation– Off. Equip. 30,800 Land Bank Loan 25,600 50,000 Willow Deng , Capital (1 July 2019) 192,420 Willow Deng , Drawings 23,500 Sales Revenue Unearned Sales Revenue 345,400 6,870 Sales Returns & Allowances 9,670 Salaries Expense 34,600 Cost of Sales 187,500 Freight inward 7,865 Rental Income 20,100 Rent Expense 33,000 Interest Expense 4,900 Electricity and Gas Expense Discount allowed 4,690 9,000 Insurance Expense 6,230 Advertising Expense 7,890 . . $645,590 $645,590 Continued over the page Additional information: Office Equipment is expected to have a useful life of 10 years and will then be sold for an estimated amount of $3,000. Accrued salaries expense at 30 June is $4,876. $9,500 of the recorded sales represents payments for goods which will not be delivered until July 2020. A physical count shows supplies of $1,450 on hand at 30 June. The prepaid insurance was paid for twelve months commencing 1st March. A physical stock take of inventory at 30 June reveals $47,000 on hand. Upon receipt of the business’s bank statement, it was observed that the business had earned $1,050 rental income on 30 June 2020. This amount was directly paid by a tenant into the business’s bank account. The accounting records need to be updated for this transaction. It is estimated that 3% of the 30 June balance of accounts receivable are unlikely to be received. A payment of $5,029 on 20 May for advertising expense has been incorrectly debited to freight inward account. REQUIRED: It is now the end of the financial year and based on the information Willow has provided above, the CEO of Best Accounting Solutions Pty Ltd (Lisa Turner) has asked you to prepare any necessary balance day adjusting journals. Use the General Journal document provided on the following page to record any journal entries required. All journals must be correctly formatted and include a narration (explanation) for each entry.
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.
Willow Deng is the sole owner of Spinnaker Pty Ltd, a private company selling sailing accessories in Adelaide. He has been experiencing tremendous growth in his business in recent years. He has approached Best Accounting Solutions Pty Ltd to help develop improved accounting systems for his business. Assume you are a graduate accountant working for Best Accounting Solutions Pty Ltd and you are required to prepare the year-end Balance Day Adjustments Journals for Spinnaker Pty Ltd.
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SPINNAKER PTY LTD UNADJUSTED AS AT 30 JUNE 2020
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Continued over the page
Additional information:
- Office Equipment is expected to have a useful life of 10 years and will then be sold for an estimated amount of $3,000.
- Accrued salaries expense at 30 June is $4,876.
- $9,500 of the recorded sales represents payments for goods which will not be delivered until July 2020.
- A physical count shows supplies of $1,450 on hand at 30 June.
- The prepaid insurance was paid for twelve months commencing 1st March.
- A physical stock take of inventory at 30 June reveals $47,000 on hand.
- Upon receipt of the business’s bank statement, it was observed that the business had earned $1,050 rental income on 30 June 2020. This amount was directly paid by a tenant into the business’s bank account. The accounting records need to be updated for this transaction.
- It is estimated that 3% of the 30 June balance of accounts receivable are unlikely to be received.
- A payment of $5,029 on 20 May for advertising expense has been incorrectly debited to freight inward account.
REQUIRED:
It is now the end of the financial year and based on the information Willow has provided above, the CEO of Best Accounting Solutions Pty Ltd (Lisa Turner) has asked you to prepare any necessary balance day adjusting journals.
Use the General Journal document provided on the following page to record any
All journals must be correctly formatted and include a narration (explanation) for each entry.
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