For each of the following activities, identify the effect on each component of the income statement and balance sheet. (Enter all amounts as positive values. If the effect is both increase and decrease, select "Both" and enter the amount.) 1. $14,000 of services were provided to clients on credit today. 2. $5,000 cash was collected for services performed on credit last month. 3. $25,000 cash was borrowed from the bank. 4. $500 of advertising was done in the local newspaper today on account. 5. $500 was paid regarding the advertising in (4) above. 6. The owner invested an additional $10,000 cash into the business. 7. The owner withdrew $5,000 of cash from the business. 8. The owner took $200 worth of office supplies home for personal use. 9. A new computer was purchased for $2,000 cash. 10. A one-year insurance policy costing $12,000 was purchased today. 11. Purchased $45 of fuel for the van; paid cash. 12. Collected $900 from a client for work performed today.
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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