Morgan runs a calendar printing business. He rented a shop to expand his business. The rent costs $2 000 per month. His business has a financial year end of 31 March. The following information has been provided. Rent expense account Date 2020 Apr 1 2021 Jan 31 Mar 31 31 Particulars (a) Cash at bank Prepaid rent expense Income summary REQUIRED (a) State the name of the item. Account balances at 1 April 2020 Commission income received in advance Debit S (b) State the amount to be shown on 31 March 2021. (c) Explain both entries on 31 March 2021. The business also provided the following information. During the year ended 31 March 2021 Commission received by cheque 30 500 $ 800 4 200 Credit $ 600 (b)(0) (b)(ii) Balance $ 600 Cr 29 900 Dr Additional information Commission income, $1 200, had not been received on 31 March 2021. REQUIRED (d) Prepare the journal entries to account for commission income for the year ended 31 March 2021, including the closing entry. Narrations are not required. (e) State the effect on each of the following if the commission receivable of $1 200 wa not adjusted on 31 March 2021, (i) Profit for the year ended 31 March 2021 (ii) Current assets as at 31 March 2021
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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