E1-11 Preparing an Income Statement and Balance Sheet ⒸLO1-1 Painter Corporation was organized by five individuals on January 1 of the current year. At the end of January of the current year, the following monthly financial data are available: Total revenues Total expenses (excluding income taxes) Income tax expense (all unpaid as of January 31) Cash balance, January 31 Receivables from customers (all considered collectible) Merchandise inventory (by inventory count at cost) Payables to suppliers for merchandise purchased from them (will be paid during February of the current year) Common stock No dividends were declared or paid during January. Required: Complete the following two statements: Total revenues Less: Total expenses (excluding income tax) Pretax income Less: Income tax expense Net income Assets Cash PAINTER CORPORATION Income Statement For the Month of January, Current Year Total assets Receivables from customers Merchandise inventory Liabilities PAINTER CORPORATION Balance Sheet At January 31, Current Year Payables to suppliers Income taxes payable Total liabilities Stockholders' Equity Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ Page 32 $305,000 189,000 35,000 65,150 44,700 94,500 25,950 62,400
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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