Instructions a. Create a general ledger account for each of the above accounts and enter the August 1 balances. b. Record and post the August transactions. Update the balances in the general ledger accounts.
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.
![Adjustment and additional data:
1. A count of supplies on August 31 shows $755 on hand.
2. The equipment has an estimated eight-year useful life.
Remember that adjusting entries are done annually, not
monthly.
3. Of the notes payable, $6,000 must be paid on September 1
each year.
4. An analysis of the Unearned Revenue account shows that
$3,750 has been earned by August 31. A corresponding
entry of $2,325 for Cost of Goods Sold will also need to be
recorded for these sales.
5. Interest accrued on the note payable to August 31 was $175.
6. A count of the merchandise inventory on August 31 shows
$76,560 of inventory on hand.
Instructions
a. Create a general ledger account for each of the above
accounts and enter the August 1 balances.
b. Record and post the August transactions. Update the
balances in the general ledger accounts.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9b1d98cf-a768-4464-b954-6506c05fcae4%2F6c112016-833b-42a8-8317-0f4c0e0e522f%2Fi2jakc_processed.jpeg&w=3840&q=75)
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The Hammer Shop, owned by Joe Smith, sells skateboards in the
summer and snowboards in the winter. The shop has an August
31 fiscal year end and uses a perpetual inventory system and the
earnings approach. On August 1, 2024, the company had the
following balances in its general ledger.
Cash
Merchandise inventory
Supplies
Equipment
Accumulated depreciation equipment 13,275 Cost of goods sold
12,650 Salaries expense
4,680 Rent expense
Accounts payable
Unearned revenue
Notes payable
J. Smith, capital
Aug.
2
Payable.
4
5
5
8
9
10
During August, the last month of the fiscal year, the company
had the following transactions:
15
19
21
$21,385J. Smith, drawings
64,125 Sales
3,750 Rent reven
70,800 Sales returns and allowances
23
24
42,000 Insurance expense
58,400 Interest expense
Sold merchandise costing $7,900 for $12,260 cash.
Purchased merchandise on account from Orange Line
Co., n/30, FOB shipping point, for $24.500.
Paid freight charges of $500 on merchandise
purchased from Orange Line Co.
Purchased supplies on account for $345.
Refunded a customer $425 cash for returned
merchandise. The merchandise had cost $265 and was
returned to inventory.
Sold merchandise on account to Spider Company
for $15,750, terms 2/10, n/30, FOB shipping point.
The merchandise had a cost of $9,765.
11 Paid Orange Line Co. for half of the merchandise
purchased on August 5.
12
Spider Company returned $750 of the merchandise
it purchased. Hammer Shop issued Spider a credit to
its account. The merchandise had a cost of $465 and
was returned to inventory.
Paid salaries, $3,100.
Spider Company paid the amount owing.
Purchased $9,900 of merchandise from Rainbow
Option Co. on account, terms 2/10, n/30, FOB
destination.
30
30
31
$ 52,800
485,500
1,200
11,420
301,010
68,200
18,150
4,140
1.925
1 Paid $1,650 for August's rent.
Paid $6,500 of the amount included in Accounts
Returned $800 of the merchandise to Rainbow
Option Co. and received a credit on the account.
Received $525 cash in advance from customers for
merchandise to be delivered in September.
Paid salaries, $3,100.
Paid Rainbow Option Co. the amount owing.
Joe Smith withdrew $4.800 cash.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9b1d98cf-a768-4464-b954-6506c05fcae4%2F6c112016-833b-42a8-8317-0f4c0e0e522f%2Fz1u23ll_processed.jpeg&w=3840&q=75)
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