G& J Merchandising & More is a family-owned auto-parts store. You are the management accountant of the concern and have been given the task of preparing the cash budget for the business for the quarter ending March 31, 2021. Your data collection has yielded the following: Extracts from the sales and purchases budgets are as follows: Month Cash Sales | Sales on Account Purchases November 2020- March 2021 November 390,000 151,100 145,500 159,025 169,350 176,200 480,000 600,000 700,000 650,000 December 360,000 505,000 400,000 518,000 January February March 800,000 (ii) An analysis of the records shows that trade receivables (accounts receivable) are settled according to the following credit pattern, in accordance with the credit terms 2/30, n90: 45% in the month of sale 30% in the first month following the sale 25% in the seconi month following the sale (iii) Expected purchases include cash purchases of $25,000 in January and $18,000 in March. All other purchases are on account. Accounts payable are settled as follows, in accordance with the credit terms 4/30, n60: 75% in the month in which the inventory is purchased 25% in the following month (ir) The management of G & J Merchandising & More is in the process of upgrading its fleet of motor vehicles. During March the company expects to sell an old Toyota Corolla motor vehicle that cost $500,000 at a gain of $45,000. Accumulated depreciation on this motor vehicle at that time is expected to be $340,000. The employee will be allowed to pay a deposit equal to 60% of the selling price in March; the balance will be settled in two equal amounts in April & May of 2021. (1) An air conditioning unit, which is estimated to cost $300,000, will be purchased in February. The manager has made arrangements with the suppliers to make a cash deposit of 40% upon signing of the agreement in February. The balance will be settled in four (4) equal monthly instalments beginning March 2021. (vi) A long-term bond purchased by G & J Merchandising & More 4 years ago, with a face value of $500,000 will mature on January 20, 2021. In order to meet the financial obligations of the business, management has decided to liquidate the investment upon maturity. On that date quarterly interest computed at a rate of 5%% per anmum is also expected to be collected. (vii) Fixed operating expenses which accrue evenly throughout the year, are estimated to be $2,016,000 per ammum, [including depreciation on non-current assets of $42,000 per month] and are settled monthly.
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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