Effects of Adjusting Entries Franc Mari Gangoso Haulers is in the cargo business. The entity is servicing the cargo forwarding requirements of businesses within the Panay Island. At the end of accounting year, Dec. 31, 2002, the following data must be considered to effect the adjusting entries: a. On July 1, 2002, an eighteen-months insurance coverage on trucks was paid and debited to Prepaid Insurance. Premiums amounted to P18,000 and coverage began immediately. b. During 2002, office supplies amounting to P8,000 were purchased for cash and debited to Office Supplies. At the end of 2001, the inventory count of supplies on hand was P2,000. Inventory of supplies as at Dec. 31, 2002 showed P3,000. c. On Dec. 31, 2002, Buenaflor Motors completed repairs on one of the trucks at a cost of P8,000; the amount is not yet recorded and by agreement will be paid during Jan. 2003. d. In Dec. 2002, a real property tax assessment for P16,000 on land owned during 2002 was received from the city. The taxes, which are unpaid and unrecorded, are already due but the company intends to pay them on Feb. 15, 2003. e. On Dec. 31, 2002, Gangoso completed a bulk-hauling contract. The bill was for P80,000 payable within 30 days. No cash has been collected, and no journal entry has been made for this transaction. f. On July 1, 2002, the company purchased a new hauling van at a cash price of P236,000. The estimated useful life of the van was 10 years, with an estimated residual value of P36,000. No depreciation has been recorded for 2002 (compute depreciation for six months in 2002). g. On Oct. 1, 2002, Gangoso borrowed P100,000 from a multi-purpose cooperative on a 6-months, 12% per annum note payable. The principal plus interest is payable at the end of 6 months. Required: 1. Prepare the adjusting entries. 2. Describe the effects of the adjusting entries on net income, total assets, total liabilities and owner's equity. Fill in the table and use (+) to indicate an increase and (-) to indicate a decrease to the mentioned items.
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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