Balikatan Store is completing the accounting process for the year just ended December 31, 200B. The transactions in 200B have been journalized and posted. The following data with respect to adjusting entries were available: 1. Office supplies inventory at January 1, 200B, was P2,500. Office supplies purchased and debited to office supplies inventory during the year amounted to P6,000. The year-end inventory showed P3,000 of supplies on hand. 2. Wages earned on December 200B, unpaid and unrecorded on December 31, 200B, amounted to P27,000. The last payroll was December 28; next payroll will be January 6, 200C. 3. Three - fourths of the basement of the store is rented for P11,000 per month to another merchant, Kano Enterprises. Kano sells comparable, but not competitive, merchandise. On November 1, 200B, the store collected six months' rent in advance from Kano in the amount of P66,000, which was credited in full to rent revenue when collected. 4. The remaining basement space is rented to Gloria Specialty Shop for P5,200 per month, payable monthly. On December 31, 200B, the rent for November and December was neither collected nor recorded. Collection is expected on January 10, 200C. 5. Delivery equipment that cost P300,000 was being used by the store. The equipment was estimated to have a useful life of four years and a residual value of P6,000 at the end of four years. Assume depreciation for a full year for 200B. The asset will be depreciated evenly over its useful life. 6. On July 1, 200B, a two-year insurance premium amounting to P30,000 was paid in cash and debited in full to Prepaid Insurance. Coverage began on July 1, 200в. 7. Balikatan operates a repair shop to meet its own needs. Also, the shop does repairs for Kano. At the end of December 31, 200B, Kano did not pay for repairs completed amounting P7,500. This amount has not been recorded as Repairs Shop Revenue. Collection is expected on January 200C.
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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