An evaluation of a physical stock count on 30th April, 2020 in respect of the financial year ending on that date at Cranfleet Commodities has produced a figure of ₤187,033. The firm’s book-keeper has approached you, as the accountant, for assistance in dealing with the following matters to enable him to arrive at a final figure of closing inventory for inclusion in the annual accounts: (1) 320 components included at their original cost of ₤11 each can now be bought in for only ₤6 each due to over production by the manufacturer. This drop in price is expected to be only temporary and the purchase price is expected to exceed its original figure within 12 months. Cranfleet Commodities intends to continue selling the existing stock at the present price of ₤15 each. (2) It has been discovered that certain items which had cost ₤5,657 have been damaged. It will cost ₤804 to repair them after which they can be sold for ₤6,321. (3) On one stock sheet a sub-total of ₤9,105 has been carried forward as ₤1,095. (4) 480 units which cost ₤1.50 each have been extended at ₤15.00 each.
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.
An evaluation of a physical stock count on 30th April, 2020 in respect of the financial year ending on that date at Cranfleet Commodities has produced a figure of ₤187,033.
The firm’s book-keeper has approached you, as the accountant, for assistance in dealing with the following matters to enable him to arrive at a final figure of closing inventory for inclusion in the annual accounts:
(1) 320 components included at their original cost of ₤11 each can now be bought in for only ₤6 each due to over production by the manufacturer. This drop in price is expected to be only temporary and the purchase price is expected to exceed its original figure within 12 months. Cranfleet Commodities intends to continue selling the existing stock at the present price of ₤15 each.
(2) It has been discovered that certain items which had cost ₤5,657 have been damaged. It will cost ₤804 to repair them after which they can be sold for ₤6,321.
(3) On one stock sheet a sub-total of ₤9,105 has been carried forward as ₤1,095.
(4) 480 units which cost ₤1.50 each have been extended at ₤15.00 each.
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