Action Quest Games adjusts its accounts annually. Assume that any prepaid expenses are initially recorded in asset accounts. Assume that any revenue collected in advance is initially recorded as liabilities. The following information is available for the year ended December 31, 2021: 1. A $3,600 one-year insurance policy was purchased on April 1, 2021. 2. Paid $5,500 on August 31, 2021, for five months' rent in advance. On September 27, 2021, received $3,500 cash from a corporation that sponsors games for the most improved students attending a nearby school. The $3,500 was for 10 games, worth $350 each, that are played on the first Friday of each month starting in October. (Use the Unearned Revenue account.) 3. Signed a contract for cleaning services starting December 1, 2021, for $500 per month. Paid for the first three months on November 30, 2021. (Use Office Expense for the adjusting entry.) 4. On December 15, 2021, sold $1,030 of gift certificates to a local game club. On December 31, 2021, determined that $540 of these gift certificates had not yet been redeemed. (Use the account Unearned Revenue.) 5.
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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