Cal Consulting follows the practice that prepayments are debited to expense when paid, and unearned revenues are credited to revenue when cash is received. Given this company’s accounting practices, which one of the following applies to the preparation of adjusting entries at the end of its first accounting period? a. Unearned fees (on which cash was received in advance earlier in the period) are recorded with a debit to Consulting Fees Earned of $500 and a credit to Unearned Consulting Fees of $500. b. Unpaid salaries of $400 are recorded with a debit to Prepaid Salaries of $400 and a credit to Salaries Expense of $400. c. Office supplies purchased for the period were $1,000. The cost of unused office supplies of $650 is recorded with a debit to Supplies Expense of $650 and a credit to Office Supplies of $650. d. Earned but unbilled (and unrecorded) consulting fees for the period were $1,200, which are recorded with a debit to Unearned Consulting Fees of $1,200 and a credit to Consulting Fees Earned of $1,200.
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.
Cal Consulting follows the practice that prepayments are debited to expense when paid, and unearned
revenues are credited to revenue when cash is received. Given this company’s accounting practices, which
one of the following applies to the preparation of
a. Unearned fees (on which cash was received in advance earlier in the period) are recorded with a debit
to Consulting Fees Earned of $500 and a credit to Unearned Consulting Fees of $500.
b. Unpaid salaries of $400 are recorded with a debit to Prepaid Salaries of $400 and a credit to Salaries
Expense of $400.
c. Office supplies purchased for the period were $1,000. The cost of unused office supplies of $650 is
recorded with a debit to Supplies Expense of $650 and a credit to Office Supplies of $650.
d. Earned but unbilled (and unrecorded) consulting fees for the period were $1,200, which are recorded
with a debit to Unearned Consulting Fees of $1,200 and a credit to Consulting Fees Earned of $1,200.
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