Jassal Music Inc. is located in Edmonton, Alberta, and reports its financial information using IFRS. You were recently hired as the company's chief accountant to fill a long-standing vacancy. Your review of the accounting records for the year ended December 31, 20X4, has uncovered the following transactions: 1. Jassal renewed the commercial and business insurance policy in August 20X4 for the year commencing September 1, 20X4. The company recorded the $25,500 payment as a prepaid expense. 2. The company rents instruments to schools and has contracts with customers in the school rental program that run for the full academic year (September to June). Customers pay the yearly fee in advance for the instrument rentals. In September 20X4, the company received $80,000 cash and recorded it as rental income. 3. On January 1, 20X4, Jassal received an $18,000, 0% note receivable from Ryan Tower Inc., in exchange for a delivery vehicle Jassal no longer needed. Ryan Tower is repaying the note in three equal installments of $6,000, with the first payment due January 1, 20X5. The market rate of interest when the note was received was 5% per annum. The sale of the vehicle was correctly recorded. 4. During the 20X4 fiscal year, Jassal sold a violin that usually retails for $1,650 from its inventory of new instruments. In exchange, Jassal received a computer system that normally sells for its fair value of $1,800. The cost of the violin was $1,500. The transaction has not yet been recorded. Required Prepare year-end adjusting entries for transactions 1 to 3 and the required entry for transaction 4.
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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