Mr. Sabri Salleh worked as an accountant with Saderi Company for the past seven years. His sudden death due to Covid 19, had affected accounting closing preparation for Saderi Company. Before his death, he managed to prepare a halfway unadjusted trial balance as of December 31, 2020, with several items are still in various respective ledger accounts. Incomplete and Unadjusted Trial Balance as at December 31, 2020 Debit (RM) Credit (RM) Property, plant and equipment 380,000 Accumulated depreciation 213,400 Cash 133,800 Accounts receivable 53,950 Inventories, December 31, 2020 260,000 10% Long-term Islamic investments 100,000 Accounts payable 39,800 Sales revenue 970,000 Ordinary shares capital 320,000 Administrative expense 67,500 Selling expense 91,000 Other expenses 21,000 Retained earnings, December 31, 2020 167,000 Various balances that are still in ledgers: Patent RM80,000; Prepaid expense RM27,000; Allowance for doubtful account RM1,900; Sukuk (long-term debt) RM150,000; Unearned revenue RM80,000; Cost of goods sold RM712,000; Supplies RM10,000; and Income tax expense RM5,850. To make it worst, there are several transactions yet to be accounted for at year end, December 31, 2020, as follow: a. Documents showed that 60% of the unearned sales revenue has been earned in 2020. b. &RPSODLQW UHFHLYHG IURP WKH FRPSDQ\¶V VDOHV DJHQW 0U $]PDQ ZKR VDLG WKDW KH ZDV \HW WR EH SDLG IRU 'HFHPEHU ¶V VDODU\ DPRXQWHG WR 50 c. One of the customers, XYZ Sdn, Bhd., was declared bankrupt and RM1,400 of its account receivable balance is to be written-off. It is also estimated that due to the prolonged pandemic, as high as 30% of the outstanding account receivable is uncollectible at year end. d. ,W LV WKH FRPSDQ\¶V SROLF\ WKDW GHSUHFLDWLRQ LV WR EH SURYLGHG RQ WKH FRPSDQ\¶V property, plant and equipment at the rate of 10% on cost. e. Despite the challenging economy, the board of directors of Saderi Company declared 5% dividends on its ordinary shares which is to be paid on 10 January 2021. f. Hibah (interest) on the 10% long-term Islamic investment is accrued at year-end. The investment was made on September 1, 2020. g. On July 1, 2020, Saderi Company sold for RM35,000 equipment which originally cost RM48,000. Accumulated depreciation on this equipment at 4 January 1, 2020, was RM19,200. h. The patent was acquired on March 31, 2020, and has a useful life of ten years. i. The company purchased a new lorry in December 2020 for RM160,000 and signed a note payable for the amount. No depreciation is allocated in the year of acquisition. j. Prepaid expense expired into administrative expense amounted to RM12,000. Required: 1. Journalize the above transactions from (a) to (j). 2. Prepare the Statement of Profit or Loss and Other Comprehensive Income, and Statement of Changes in Equity for the year ended December 31, 2020, and a Statement of Financial Position as at December 31, 2020.
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.
Mr. Sabri Salleh worked as an accountant with Saderi Company for the past seven years. His sudden death due to Covid 19, had affected accounting closing preparation for Saderi Company. Before his death, he managed to prepare a halfway unadjusted
Incomplete and Unadjusted Trial Balance
as at December 31, 2020
Debit (RM) Credit (RM)
Property, plant and equipment 380,000
Inventories, December 31, 2020 260,000
10% Long-term Islamic investments 100,000
Accounts payable 39,800 Sales revenue 970,000 Ordinary shares capital 320,000 Administrative expense 67,500
Selling expense 91,000
Other expenses 21,000
Various balances that are still in ledgers: Patent RM80,000; Prepaid expense RM27,000; Allowance for doubtful account RM1,900; Sukuk (long-term debt) RM150,000; Unearned revenue RM80,000; Cost of goods sold RM712,000; Supplies RM10,000; and Income tax expense RM5,850.
To make it worst, there are several transactions yet to be accounted for at year end, December 31, 2020, as follow:
a. Documents showed that 60% of the unearned sales revenue has been earned in 2020.
b. &RPSODLQW UHFHLYHG IURP WKH FRPSDQ\¶V VDOHV DJHQW 0U $]PDQ ZKR VDLG WKDW KH ZDV \HW WR EH SDLG IRU 'HFHPEHU ¶V VDODU\ DPRXQWHG WR 50
c. One of the customers, XYZ Sdn, Bhd., was declared bankrupt and RM1,400 of its account receivable balance is to be written-off. It is also estimated that due to the prolonged pandemic, as high as 30% of the outstanding account receivable is uncollectible at year end.
d. ,W LV WKH FRPSDQ\¶V SROLF\ WKDW GHSUHFLDWLRQ LV WR EH SURYLGHG RQ WKH FRPSDQ\¶V property, plant and equipment at the rate of 10% on cost.
e. Despite the challenging economy, the board of directors of Saderi Company declared 5% dividends on its ordinary shares which is to be paid on 10 January 2021.
f. Hibah (interest) on the 10% long-term Islamic investment is accrued at year-end. The investment was made on September 1, 2020.
g. On July 1, 2020, Saderi Company sold for RM35,000 equipment which originally cost RM48,000. Accumulated depreciation on this equipment at
4
January 1, 2020, was RM19,200.
h. The patent was acquired on March 31, 2020, and has a useful life of ten years. i. The company purchased a new lorry in December 2020 for RM160,000 and signed a note payable for the amount. No depreciation is allocated in the year of acquisition.
j. Prepaid expense expired into administrative expense amounted to RM12,000.
Required:
1. Journalize the above transactions from (a) to (j).
2. Prepare the Statement of Profit or Loss and Other Comprehensive Income, and Statement of Changes in Equity for the year ended December 31, 2020, and a
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