Davis, Attorney at Law, opened his office on October 1. The account headings are presented below. Transactions completed during the month follow. Assets = Liabilities + Prepaid Cash + Supplies + Insurance + Equipment + Library = Payable + a. Davis deposited $21,000 in a bank account in the name of the business. b. Bought office equipment on account from QuipCo, $9,525. c. Davis invested his personal law library, which cost $2,750. d. Paid the office rent for the month, $1,500, Ck. No. 2000 (Rent Expense). e. Bought office supplies for cash, $230, Ck. No. 2001. f. Bought insurance for two years, $900, Ck. No. 2002. g. Sold legal services for cash, $8,625 (Professional Fees). Office Accounts Capital h. Paid the salary of the part-time receptionist, $1,675, Ck. No. 2003 (Salary Expense). i. Received and paid the telephone bill, $390, Ck. No. 2004 (Telephone Expense). j. Received and paid the bill for utilities, $375, Ck. No. 2005 (Utilities Expense). k. Sold legal services for cash, $9,250 (Professional Fees). 1. Paid on account to QuipCo, $2,650, Ck. No. 2006. m. Davis withdrew cash for personal use, $2,300, Ck. No. 2007. Owner's Equity Drawing + Revenue - Expenses Required: 1. Record the transactions and the balances after each transaction. 2. After all transactions have been entered, enter the total assets and the total liabilities plus owner's equity in the entry boxes below the transactions. If the two totals are not equal, first check the addition and subtraction. If you still cannot find the error, reanalyze each transaction. Enter increases to accounts as positive amounts and decreases to accounts as negative amounts. If an amount box does not require an entry, leave it blank or enter "0".
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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