E4-5 (Algo) Recording Adjusting Entries and Reporting Balances in Financial Statements LO4-1, 4-2 [The following information applies to the questions displayed below.] A+T Williamson Company is making adjusting entries for the year ended December 31 of the current year. In developing information for the adjusting entries, the accountant learned the following: a. A two-year insurance premium of $2,880 was paid on October 1 of the current year for coverage beginning on that date. The bookkeeper debited the full amount to Prepaid Insurance on October 1. b. At December 31 of the current year, the following data relating to Shipping Supplies were obtained from the records and supporting documents. Shipping supplies on hand, January 1 of the current year $ 17,000 Purchases of shipping supplies during the current year 65,000 11,000 Shipping supplies on hand, counted on December 31 of the current year
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
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E4-5 (Algo) Recording Adjusting Entries and Reporting Balances in Financial Statements LO4-1, 4-2
[The following information applies to the questions displayed below.]
A+T Williamson Company is making adjusting entries for the year ended December 31 of the current year. In developing
information for the adjusting entries, the accountant learned the following:
a. A two-year insurance premium of $2,880 was paid on October 1 of the current year for coverage beginning on that
date. The bookkeeper debited the full amount to Prepaid Insurance on October 1.
b. At December 31 of the current year, the following data relating to Shipping Supplies were obtained from the records
and supporting documents.
Shipping supplies on hand, January 1 of the current year
Purchases of shipping supplies during the current year
$ 17,000
65,000
11,000
Shipping supplies on hand, counted on December 31 of the current year
E4-5 Part 1
Required:
1. Record the adjusting entry for insurance at December 31 of the current year. (Do not round intermediate calculations. If no entry is
required for a transaction/event, select "No journal entry required" in the first account field.)
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Journal entry worksheet
1
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Record the adjusting journal entry for insurance premium of $2,880 on
December 31 of the current year.
Note: Enter debits before credits.
General Journal
Debit
Credit
Transaction
a
Clear entry
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Record entry](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F266d5c88-4132-4eca-8561-6ebd3b0393f5%2Ff1cd7d88-e70e-4e29-a868-8b24d02375dc%2Fymtw9fl_processed.png&w=3840&q=75)
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