B- Farah Consulting completed the following transactions during December 2016: Dec. 2 Farah invested $20,000 cash into the business Paid monthly office rent, $2,000. Paid cash for a computer, $3,600. Purchased office furniture on account, $3,000. Purchased office supplies on account, $800. 9 Performed consulting service for a client on account, $2,500. 12 Paid utilities expenses, $ 150. 18 Performed service for a client and received cash of $2,100. 21 Borrowed $2,400 cash, signing a note payable to be paid May 31, 2018. 21 Hired an administrative assistant to be paid $2,055 on the 20th day of each month. The secretary begins work immediately. 26 Paid $200 on account. 28 Collected $400 on account. 30 Farah withdrew $1,000 cash from the business for personal use. Requirements: Need to Answer Part 4 , 5, 6 only Journalize the transactions, Explanations are not required. Post the journal entries to the T-accounts, and calculate account balances. Prepare a trial balance as of December 31, 2016. Prepare the income statement of Farah Consulting for the month ended December 31, 2016. Prepare a classified balance sheet as of December 31, 2016. 6. Is Farah’s ability to pay its short term debts strong or weak? Support your answer by calculating the suitable ratio(s).
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.
B- Farah Consulting completed the following transactions during December 2016:
Dec. 2 Farah invested $20,000 cash into the business
- Paid monthly office rent, $2,000.
- Paid cash for a computer, $3,600.
- Purchased office furniture on account, $3,000.
- Purchased office supplies on account, $800.
9 Performed consulting service for a client on account, $2,500.
12 Paid utilities expenses, $ 150.
18 Performed service for a client and received cash of $2,100.
21 Borrowed $2,400 cash, signing a note payable to be paid May 31, 2018.
21 Hired an administrative assistant to be paid $2,055 on the 20th day of each month.
The secretary begins work immediately.
26 Paid $200 on account.
28 Collected $400 on account.
30 Farah withdrew $1,000 cash from the business for personal use.
Requirements: Need to Answer Part 4 , 5, 6 only
- Journalize the transactions, Explanations are not required.
Post the journal entries to the T-accounts, and calculate account balances.- Prepare a
trial balance as of December 31, 2016. - Prepare the income statement of Farah Consulting for the month ended December 31, 2016.
- Prepare a classified
balance sheet as of December 31, 2016.
6. Is Farah’s ability to pay its short term debts strong or weak? Support your answer by calculating the suitable ratio(s).
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