lcorn Service Company was formed on January 1, Year 1. Events Affecting the Year 1 Accounting Period Acquired $61,000 cash from the issue of common stock. Purchased $1,400 of supplies on account. Purchased land that cost $20,000 cash. Paid $1,400 cash to settle accounts payable created in Event 2. Recognized revenue on account of $44,000. Paid $22,000 cash for other operating expenses. Collected $39,000 cash from accounts receivable. Information for Year 1 Adjusting Entries Recognized accrued salaries of $3,300 on December 31, Year 1. Had $300 of supplies on hand at the end of the accounting period. Events Affecting the Year 2 Accounting Period Acquired $21,000 cash from the issue of common stock. Paid $3,300 cash to settle the salaries payable obligation. Paid $3,900 cash in advance to lease office space. Sold the land that cost $20,000 for $20,000 cash. Received $5,100 cash in advance for services to be performed in the future. Purchased $1,100 of supplies on account during the year. Provided services on account of $33,000. Collected $34,000 cash from accounts receivable. Paid a cash dividend of $6,000 to the stockholders. Paid other operating expenses of $20,500. Information for Year 2 Adjusting Entries The advance payment for rental of the office space (see Event 3) was made on March 1 for a one-year term. The cash advance for services to be provided in the future was collected on October 1 (see Event 5). The one-year contract started on October 1. Had $400 of supplies remaining on hand at the end of the period. Recognized accrued salaries of $4,000 at the end of the accounting period. Recognized $500 of accrued interest revenue. Required Identify each event affecting the Year 1 and Year 2 accounting periods as asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE). Record the effects of each event under the appropriate general ledger account headings of the accounting equation.
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.
Alcorn Service Company was formed on January 1, Year 1.
Events Affecting the Year 1 Accounting Period
-
Acquired $61,000 cash from the issue of common stock.
-
Purchased $1,400 of supplies on account.
-
Purchased land that cost $20,000 cash.
-
Paid $1,400 cash to settle accounts payable created in Event 2.
-
Recognized revenue on account of $44,000.
-
Paid $22,000 cash for other operating expenses.
-
Collected $39,000 cash from accounts receivable.
Information for Year 1
-
Recognized accrued salaries of $3,300 on December 31, Year 1.
-
Had $300 of supplies on hand at the end of the accounting period.
Events Affecting the Year 2 Accounting Period
-
Acquired $21,000 cash from the issue of common stock.
-
Paid $3,300 cash to settle the salaries payable obligation.
-
Paid $3,900 cash in advance to lease office space.
-
Sold the land that cost $20,000 for $20,000 cash.
-
Received $5,100 cash in advance for services to be performed in the future.
-
Purchased $1,100 of supplies on account during the year.
-
Provided services on account of $33,000.
-
Collected $34,000 cash from accounts receivable.
-
Paid a cash dividend of $6,000 to the stockholders.
-
Paid other operating expenses of $20,500.
Information for Year 2 Adjusting Entries
-
The advance payment for rental of the office space (see Event 3) was made on March 1 for a one-year term.
-
The cash advance for services to be provided in the future was collected on October 1 (see Event 5). The one-year contract started on October 1.
-
Had $400 of supplies remaining on hand at the end of the period.
-
Recognized accrued salaries of $4,000 at the end of the accounting period.
-
Recognized $500 of accrued interest revenue.
Required
Identify each event affecting the Year 1 and Year 2 accounting periods as asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE). Record the effects of each event under the appropriate general ledger account headings of the
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