d. The income statement of a merchandising company includes a major type of cost that does not appear in the income statement of a service type business. Identify the cost and explain what it represents. e. In your opinion which companies prefer perpetual inventory system over periodic to record the inventory related transactions and which companies do the opposite. Furthermore, why do you think that companies take a physical inventory? When and how they do it? f. Accounting is sometimes described as the language of business. What is meant by this description? Provide a critical review of the description. How would you justify the statement that financial accounting information is general purpose information and not managerial or tax information? NOTE: Please solve for subparts d, e,,f
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.
Genuine Accessories Inc. uses a perpetual inventory system and records purchases at the net cost
and sales at gross invoice price. The following are recent merchandising transactions:
Mar. 6 Purchased 60 machines from Village Hardware on account. Invoice price, $350 per unit. The terms of purchase were 3/10, n/30.
Mar. 11 Sold 15 of these machines on account for $525 each to White Electric Inc. (2/10, n/60).
Mar. 16 Collected cash within the discount period.
Mar. 19 Paid in cash to Village Hardware. Payment was made after discount period.
Mar. 25 3 units were returned by White Electric Inc.
d. The income statement of a merchandising company includes a major type of cost that does not
appear in the income statement of a service type business. Identify the cost and explain what it represents.
e. In your opinion which companies prefer perpetual inventory system over periodic to record the
inventory related transactions and which companies do the opposite. Furthermore, why do you think that companies take a physical inventory? When and how they do it?
f. Accounting is sometimes described as the language of business. What is meant by this description? Provide a critical review of the description. How would you justify the statement that financial accounting information is general purpose information and not managerial or tax information?
NOTE: Please solve for subparts d, e,,f
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