Nichols Company had the following items that required adjustment at December 31, 2013. Required: 1. Prepare the adjusting entries needed at December 31. Hide a. Electricity used during December was estimated to be $320. This amount will be paid in January. Dec. 31 (Record accrued utilities) Hide b. Owed wages to employees of $3,250 that were earned in December but unrecorded and unpaid as of the end of the year. Dec. 31 (Record accrued wages) Hide c. Service revenue of $4,900 was earned in December but unbilled and unpaid as of year end. Dec. 31 (Record revenue earned but not yet received) 2. Conceptual Connection: What is the effect on the financial statements if these adjusting entries were not made? Assets will be SelectOverstatedUnderstatedCorrect 1 of Item 4 by $. Liabilities will be SelectOverstatedUnderstatedCorrect 3 of Item 4 by $.
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.
Nichols Company had the following items that required adjustment at December 31, 2013.
Required:
1. Prepare the
a. Electricity used during December was estimated to be $320. This amount will be paid in January.
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b. Owed wages to employees of $3,250 that were earned in December but unrecorded and unpaid as of the end of the year.
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c. Service revenue of $4,900 was earned in December but unbilled and unpaid as of year end.
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2. Conceptual Connection: What is the effect on the financial statements if these adjusting entries were not made?
Assets will be SelectOverstatedUnderstatedCorrect 1 of Item 4 by $.
Liabilities will be SelectOverstatedUnderstatedCorrect 3 of Item 4 by $.
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