Ace Accounting Services Limited reports the following information for the first 11 months of the year in its November 30, 2022, trial balance: Cash Accounts receivable Supplies Prepaid insurance Equipment Accumulated depreciation-equipment Accounts payable Salaries payable Interest payable Income taxes payable Deferred revenue Bank loan payable-non-current Contributed capital Retained earnings Dividends declared Service revenue Advertising expense Office expense Rent expense Salaries expense Travel expense Utilities expense Insurance expense Depreciation expense Supplies expense Interest expense Income tax expense December 1 2 6 16 19 20 27 30 ACE ACCOUNTING SERVICES LIMITED Trial Balance November 30, 2022 2. 3. Debit $ 97,000 245,000 4. 5. 7,500 12,000 236,000 6. 7. 110,000 125,000 154,000 55,000 685,000 12,500 20,000 5,800 0 Ace Accounting Services incurred the following transactions for the month of December. 2,100 27,000 45,000 $1,838,900 Received $75,000 on account from a major customer. Paid a supplier an amount owing on account of $29,000. Performed services for customers for cash of $45,000. Paid salaries of $30,000. Received payments of $135,000 from customers on their accounts. Performed services for customers on account for $50,000. Credit $ 34,000 123,000 Paid salaries of $30,000. Paid rent of $5,000. 31 Received a $2,000 deposit from a customer for work to be performed in January 2023. 0 0 0 22,000 150,000 50,000 152,000 Adjustment and additional data: 1. Accrued $1,800 for utilities expense, $15,000 for salaries expense, and $1,400 for interest expense on the bank loan at December 31, 2023. The prepaid insurance was paid on July 1 for a one-year policy providing coverage from July 1, 2022 to June 30, 2023. Accrued an additional $5,000 of income tax expense. $25,000 of the bank loan is due to be repaid in the next year. 1,307,900 $1,838,900 Ace Accounting Services counted its supplies on December 31, 2023 and found there were $2,700 of supplies on hand. Recorded depreciation expense of $24,000 on the equipment for the year. A review of the deferred revenue account indicated that $17,500 of deferred revenue has been earned at December 31, 2023. Instructions: (a) Prepare T accounts and enter the opening balances. (This has been done for you on the template.) (b) Prepare journal entries for the December transactions and post them to the T accounts. (c) Prepare an unadjusted trial balance as at December 31, 2022. (d) Prepare and post adjusting entries for the year ended December 31, 2022, assuming adjusting entries are made annually.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Ace Accounting Services Limited reports the following information for the first 11 months of the year in its November 30 , 2022,
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