ivable 72,000 Purchases Returns and Allowances 93,000 Merchandise Inventory, Purchases Discounts 37,000 January 1, 20Y6 257,000 Freight In 48,000 Office Supplies 3,000 Sales Salaries Expense 300,000 Prepaid Insurance 4,500 Advertising Expense 45,000 Land 150,000 Delivery Expense 9,000 Store Equipment 270,000 Depreciation Expense— Accumulated Depreciation— Store Equipment 6,00
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.
On December 31, 20Y6, the balances of the accounts appearing in the ledger of Wyman Company are as follows:
| Cash | $ 13,500 | Purchases | $2,650,000 |
| 72,000 | Purchases Returns and Allowances | 93,000 | |
| Merchandise Inventory, | Purchases Discounts | 37,000 | |
| January 1, 20Y6 | 257,000 | Freight In | 48,000 |
| Office Supplies | 3,000 | Sales Salaries Expense | 300,000 |
| Prepaid Insurance | 4,500 | Advertising Expense | 45,000 |
| Land | 150,000 | Delivery Expense | 9,000 |
| Store Equipment | 270,000 | ||
| Store Equipment | 6,000 | ||
| Store Equipment | 55,900 | Miscellaneous Selling Expense | 12,000 |
| Office Equipment | 78,500 | Office Salaries Expense | 175,000 |
| Accumulated Depreciation— | Rent Expense | 28,000 | |
| Office Equipment | 16,000 | Insurance Expense | 3,000 |
| Accounts Payable | 27,800 | Office Supplies Expense | 2,000 |
| Customer Refunds Payable | 50,000 | Depreciation Expense— | |
| Salaries Payable | 3,000 | Office Equipment | 1,500 |
| Unearned Rent | 8,300 | Miscellaneous Administrative Expense | 3,500 |
| Notes Payable | 50,000 | Rent Revenue | 7,000 |
| Shirley Wyman, Capital | 530,500 | Interest Expense | 2,000 |
| Shirley Wyman, Drawing | 25,000 | ||
| Sales | 3,280,000 |
Instructions
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Does Wyman Company use a periodic or perpetual inventory system? Explain.
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Prepare a multiple-step income statement for Wyman Company for the year ended December 31, 20Y6. The merchandise inventory as of December 31, 20Y6, was $335,000.
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Prepare the closing entries for Wyman Company as of December 31, 20Y6
- What would the net income have been if the perpetual inventory system had been used?
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