Instructions Prepare income statement, statement of retained earnings and balance sheet. Record closing entries Prepare post-closing trial balance.
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.
- Clint Stillmore operates a private investigating agency called Stillmore Investigations. Some clients pay in advance for services; others are billed after services have been performed. Advance payments are credited to an account entitled Unearned Retainer Fees.
Adjusting entries are performed on a monthly An unadjustedtrial balance dated December 31, 2011, follows. (Bear in mind that adjusting entries have already been made for the first 11 months of 2011, but not for December.)
Other Data
- Accrued but unrecorded client fees earned at December 31 amount to $2,500.
- Records show that $3,500 of cash receipts originally recorded as Unearned Retainer Fees had
been earned as of December 31.
- Office supplies on hand at December 31 amount to $50.
- The company purchased all of its office equipment when it first began business. At that time, the equipment’s estimated useful life was six years (or 72 months).
- On October 1, 2011, the company renewed its rental agreement paying $2,800 cash for six
months’ rent in advance.
- On March 1 of the current year, the company paid $2,080 cash to renew its 12-month insurance policy.
- Accrued but unrecorded salaries at December 31 amount to $2,900.
- On June 1, 2011, the company borrowed money from the bank by signing a $12,000, 8 percent,
12-month note payable. The entire note, plus 12 months’ accrued interest, is due on May 31, 2012.
- The company’s CPA estimates that income taxes expense for the entire year is $9,500.
Instructions
- Prepare income statement, statement of
retained earnings andbalance sheet . - Record closing entries
- Prepare post-closing trial balance.
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