For the past three years, Carol Dixon operated part-time as shipping agent and in 2022 she decided to move to a rented office and to operate the business on a full-time basis. She registered the business as CD Shipping Agent Ltd but has no accounting personal to prepare her financial information and has approached your group for assistance. The company’s financial year end is December 31 each year. They have provided the following information and transactions for 2022:
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.
Scenario:
For the past three years, Carol Dixon operated part-time as shipping agent and in 2022 she decided to move to a rented office and to operate the business on a full-time basis. She registered the business as CD Shipping Agent Ltd but has no accounting personal to prepare her financial information and has approached your group for assistance. The company’s financial year end is December 31 each year. They have provided the following information and transactions for 2022:
Jan 1. Balances from 2021 – Cash $280,000;
Jan 2. The following assets were received from Carol Dixon in exchange for capital in the company: cash - $120,000, accounts receivable - $20,500, supplies - $25,050, and office equipment - $100,000.
Feb 1. Paid fifteen (15) months’ rent on a lease rental contract, $375,000.
Mar 30. Paid the premiums on the property and peril insurance policies, $150,000.
April 4. Received cash from clients as an advance payment for services to be provided in the coming months, $200,000.
May 5. Purchased additional office equipment on account from DT Company, $60,000.
June 6. Received cash from clients on account, $63,000.
June 10. Paid cash for newspaper advertisement, $15,800.
Aug 12. Paid DT Company a portion of the debt incurred on May 5, $45,000.
Sept 12. Recorded services provided on account for the period July 1 – Sept 12, $104,000.
Sept 30. Paid part-time workers salary, $60,000.
Oct 17. Recorded cash from cash clients for fees earned during the first half of year, $233,000.
Oct 30. Paid cash for supplies, $11,000.
Oct 30. Recorded services provided on account for the period June to July, $110,000.
Nov 24. Recorded cash from cash clients for fees earned for the period September 13- Nov 24, $190,000.
Nov 25. Received cash from clients on account, $22,000.
Nov 27. Paid part-time workers for salary $180,000.
Dec 29. Paid telephone bill for the year 2022 $60,000.
Dec 30. Paid electricity bill for the year 2022 $190,000.
Dec 30. Recorded cash from cash clients for fees earned for the period September 14- Dec 30, $190,000.
Dec 30. Recorded services provided on account for October to December 2022, $63,000
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