McMahon contributed $70,000 cash to the business, Theodore McMahon, Attorney. The business issued common stock to McMahon. Apr. 1 3 Purchased office supplies, $1,100, and furniture, $1,300, on account. 4 Performed legal services for a client and received $2,000 cash. 7 Purchased a building with a market value of $150,000, and land with a market value of $30,000. The business paid $40,000 cash and signed a note payable to the bank for the remaining amount. 11 Prepared legal documents for a client on account, $400. 15 Paid assistant's semimonthly salary, $1,200. 16 Paid for the office supplies purchased on April 3 on account. 18 Received $2,700 cash for helping a client sell real estate. 19 Defended a client in court and billed the client for $1,700. 25 Received a bill for utilities, $650. The bill will be paid next month. 28 Received cash on account, $1,100. 29 Paid $3,600 cash for a 12-month insurance policy starting on May 1. 29 Paid assistant's semimonthly salary, $1,200. 30 Paid monthly rent expense, $2,100. 30 Paid cash dividends of $3,200.
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.
Journalizing transactions, posting
Theodore McMahon opened a law office on April 1, 2018. During the first month of operations, the business completed the following transactions:
Requirements
- Record each transaction in the journal, using the following account titles: Cash;
Accounts Receivable ; Office Supplies; Prepaid insurance; Land; Building; Furniture; Accounts Payable; Utilities Payable; Notes Payable; Common Stock; Dividends; Service Revenue; Salaries Expense; Rent Expense; and Utilities Expense. Explanations are not required. - Open the following four-column accounts including account numbers: Cash, 101; Accounts Receivable, 111; Office Supplies, 121; Prepaid Insurance, 131; Land, 141; Building, 151; Furniture, 161; Accounts Payable, 201; Utilities Payable, 211; Notes Payable, 221; Common Stock, 301; Dividends, 311; Service Revenue, 411; Salaries Expense, 511; Rent Expense, 521; and Utilities Expense, 531.
- Post the journal entries to four-column accounts in the ledger, using dates, account numbers, journal references, and posting references. Assume the journal entries were recorded on page 1 of the journal.
- Prepare the trial balance of Theodore McMahon, Attorney, at April 30, 2018.
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