1. 2. 3. 4. 5. Wildhorse Travel Court was organized on July 1, 2024, by Betty Johnson. Betty is a good manager but a poor accountant. From the trial balance prepared by a part-time bookkeeper, Betty prepared the following income statement for her fourth quarter, which ended June 30, 2025. 6. Revenues 7. Supplies Prepaid Insurance Notes Payable Wildhorse Travel Court Income Statement For the Quarter Ended June 30, 2025 Rent revenue Operating expenses Advertising expense Salaries and wages expense Utilities expense Depreciation expense Maintenance and repairs expense Total operating expenses Net income $3,830 14,900 You then make inquiries and discover the following. 84,370 14,600 945 2,925 4,330 Betty suspected that something was wrong with the statement because net income had never exceeded $30,000 in any one quarter. Knowing that you are an experienced accountant, she asks you to review the income statement and other data. $216,900 You first look at the trial balance. In addition to the account balances reported above in the income statement, the trial balance contains the following additional selected balances at June 30, 2025. $8,710 96,400 $120,500 Wildhorse rental revenues include advanced rental payments received for summer occupancy, in the amount of $57,120. There were $1,835 of supplies on hand at June 30. Prepaid insurance resulted from the payment of a 1-year policy on April 1, 2025. The mail in July 2025 brought the following bills: advertising for the week of June 24, $115; repairs made June 18, $4,815; and utilities for the month of June, $220. Wage expense is $320 per day. At June 30, 4 days' wages have been incurred but not paid. The note payable is a 6% note dated May 1, 2025, and due on July 31, 2025. Income tax of $14,325 for the quarter is due in July but has not yet been recorded.
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.
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