Mystic Masters, Inc., provides fortune-telling scrvices over the Internet. In rocent ycars the com- pany has experienced severe financial difficulty. Is accountant prepares adjusting entries on a monthly basis, and closing entries on an annual basis, at December 31. An adjusted trial balance dated December 31, 2011, follows. MYSTIC MASTERS, INC. ADJUSTED TRIAL BALANCE DECEMBER 31, 2011 Debits Credits Cash. $ 960 Accounts recelvable 300 2,000 Unexpired Insurance. Prepaid rent. Supplies.. 1,500 200 Fumiture and fxtures 8,400 $ 5,200 Accumulated depreclation: fumiture and fatures. Accounts payable.. 6,540 Notes payable Salarles payable Interest payable. Uneamed clent revenue 24,000 1,700 360 200 Capital stock 4,000 Retained eamings.. 2,600 Clent revenue eamed 52,000 Insurance expense. Offce rent expense. 6,000 9,000 Supples expense.. Salary expense Depreciation expense: fumiture and ftures Offce and telephone expense 440 48,000 1,400 3,000 Intenet service expense.. 4,900 Legal expense Interest expense... Miscellanecus expense 1,500 4,000 5,000 $96,600 $96,600 Instructions a Prepure an income statement and statement of retained carnings for the year ended December 31, 2011. Also prepare the company's balance shoet dated December 31, 2011. (Hint: The company incurred no income tates expense in 2011.) h Prepure the nocessary year-end closing entrics. Prepare an afler-closing trial balance.
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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