After the accounts have been adjusted at October 31, the end of the fiscal year, the following balances were taken from the ledger of Reap Business Inc. James Reap, Capital $800,000 James Reap, Drawing 125,000 Fees earned 750,000 Wages expense 400,000 Rent expense 75,000 Supplies expense 16,000 Miscellaneous expense 5,000 Journalize the closing entries necessary to close out all temperary accounts. Not all lines may be used.
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.
After the accounts have been adjusted at October 31, the end of the fiscal year, the following balances were taken from the ledger of Reap Business Inc.
|
James Reap, Capital |
$800,000 |
|
James Reap, Drawing |
125,000 |
|
Fees earned |
750,000 |
|
Wages expense |
400,000 |
|
Rent expense |
75,000 |
|
Supplies expense |
16,000 |
|
Miscellaneous expense |
5,000 |
Journalize the closing entries necessary to close out all temperary accounts. Not all lines may be used.
Lets understand the basis.
Accounts are divided into two types which are,
(1) Temporary accounts
(2) Permenant accounts
Income/expense accounts are temporary account and needs to close at year end into income statement.
Asset/Liabilities accounts are permenant account which does not needs to close and carried forward.
Step by step
Solved in 2 steps
