Nickleby's Ski Store is completing the accounting process for its first year ended December 31, 2020. The transactions during 2020 have been journalized and posted. The following data are available to determine adjusting journal entries: a. The unadjusted balance in Office Supplies was $850 at December 31, 2020. The unadjusted balance in Supplies Expense was $0 at December 31, 2020. A year-end count showed $100 of supplies on hand. b. Wages earned by employees during December 2020, unpaid and unrecorded at December 31, 2020, amounted to $3,700. The last paycheques were issued December 28; the next payments will be made on January 6, 2021. The unadjusted balance in Wages Expense was $40,000 at December 31, 2020. c. Part of the store's basement is now being rented for $1,100 per month to K. Frey. On November 1, 2020, the store collected six months' rent in advance from Frey in the amount of $6,600. It was credited in full to Deferred Rent Revenue when collected. At December 31, 2020, the unadjusted Rent Revenue balance was $0. d. The store purchased delivery equipment at the beginning of the year. The estimated depreciation for 2020 is $3,000, although none has been recorded yet. e. On December 31, 2020, the unadjusted balance in Prepaid Insurance was $4,800. This was the amount paid in the middle of the year for a two-year insurance policy, with coverage beginning on July 1, 2020. The unadjusted balance in Insurance Expense was $800, which was the cost of insurance from January 1 to June 30, 2020. f. Nickleby's store did some ski repair work for Frey. On December 31, 2020, Frey had not yet paid for work completed, amounting to $750. This amount has not yet been recorded as Repair Shop Revenue. Collection is expected during January 2021. Required: For each of the above transactions, indicate the amount and direction of effects of the adjusting journal entry on the elements of the accounting equation. (Enter any decreases to accounts with a minus sign.) Transaction a. b. C. d. e. f. Office supplies Assets (750) Liabilities Shareholders' Equity Supplies expense (750)
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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