Mastery Problem: The Accounting Cycle. Chandler, Inc. Chandler, Inc. is owned by Roscoe Chandler and provides appraisal services to individuals and companies wishing to purchase and sell fine art. Chandler, Inc. began business on January 1, 2017, and is just completing its first year of business. Roscoe asks for your help in completing the accounting cycle for the company by assisting with the closing process. Adjusted Trial Balance Before the closing entries are journalized, you begin with an adjusted trial balance. The closing entries are essentially the link from the adjusted trial balance to the post-closing trial balance. Chandler, Inc. Adjusted Trial Balance December 31, 2017 Account Title Debit Balances Credit Balances Cash 71,000 Accounts Receivable 29,000 Prepaid Insurance Office Equipment Accumulated Depreciation-Office Equipment 16,000 60,000 40,000 accounts Payable 6,000 Salaries Payable 8,000 income Taxes Payable 4,000 Common Stock Retained Earnings Dividends Fees Earned Rent Revenue Enterest Revenue 2,000 25,000 5,000 175,600 92,000 17,200 Salaries Expense 71,000 Selling Expense Encome Taxes Expense Ensurance Expense Depreciation Expense Miscellaneous Expense 37,600 15,000 17,000 47,200 1,000 369,800 369,800
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.
Chandler, Inc.
1. Temporary account
Temporary account is the account created in the current year and as well as closed in the current year itself.
The balances in temporary account are transferred to income statements to acquire the net income earned during the current financial year.
Here, temporary accounts are
Fees earned = 175600
Rent revenue = 92600
Interest revenue = 17200
Dividends = 5000
Salaries expense = 71000
Selling expense = 37600
Income taxes expense = 15000
Insurance expense = 17000
Depreciation expense = 47200
Miscellaneous expense = 1000
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