nsaction cash in ement of bility tion ash nt of le adju mies of asinis si obuloni atom 5249qxa mollusiomast by the regular accounting staff.36 15820-61 10000 15226 s 01 tibstols bus innos YEAR-END AT OVERNIGHT AUTO SERVICE To illustrate the various types of adjusting entries, we will again use our example involving Overnight Auto Service. Chapter 3 concluded with Overnight's trial balance dated 28 February 2013 (the end of the company's second month of operations). We will now skip ahead to 31 December 2013-the end of Overnight's first year of operations. This will enable us to illustrate the preparation of annual financial statements, rather than statements that cover only a single month. 975 mod vor 1925. a sus hingang, camminent bon Most companies make adjusting entries every month. We will assume that Overnight has been following this approach throughout 2013. The company's unadjusted trial balance dated 31 December 2013, appears in Exhibit 4-2. It is referred to as an unadjusted trial balance because Overnight last made adjusting entries on 30 November; therefore, it is still necessary to make adjusting entries for the month of December. tiniamsi esilqque or to obem ei olemines bsau noad sved of bomuzan su "anizzion" 16 Cash..... Accounts receivable Shop supplies. Unexpired insurance. Notes payable. Accounts payable Income taxes payable.. Unearned rent revenue. controller or by a professional accountant, rather than In many businesses, the Land Building. Accumulated depreciation: building Tools and equipment Accumulated depreciation: tools and equipment Share capital. Retained earnings .92090x Dividends b. die...om Repair service revenue. Advertising expense Wages expense Supplies expense OVERNIGHT AUTO SERVICE Trial Balance 31 December 2013 Depreciation expense: building. Depreciation expense: tools and equipment. I Itilition $ 18,592 6,500 1,800 4,500 52,000 36,000 mon esilqque Ini bozn assd 12,000 $ 1,500 2,000 4,000 2012 v gaitzuibs 2,690 bsn li (S) bás asdass 1,56020 ed.o. betsmites esilqquz to 9,000 s 80,000 2 เวioๆ หวกล้า 0 og soms 14,000sivis2 s sbiv ad29ving voilo 31.250 171,250 3,900 etaulli of 56,800 viennengmos 6,900 11ho is sm yo ni slidw goloidov1,500 mo of se wallot 26. 10u0906 15222,000 badan zew $ чел it mo 21 Exh UNA BAL
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.
This pages is about explaining a type of
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YEAR-END AT OVERNIGHT AUTO SERVICE
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To illustrate the various types of adjusting entries, we will again use our example involving
Overnight Auto Service. Chapter 3 concluded with Overnight's trial balance dated 28 February
2013 (the end of the company's second month of operations). We will now skip ahead to
31 December 2013-the end of Overnight's first year of operations. This will enable us to
illustrate the preparation of annual financial statements, rather than statements that cover only
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Most companies make adjusting entries every month. We will assume that Overnight has
been following this approach throughout 2013. The company's unadjusted trial balance dated
31 December 2013, appears in Exhibit 4-2. It is referred to as an unadjusted trial balance
because Overnight last made adjusting entries on 30 November; therefore, it is still necessary
to make adjusting entries for the month of December. nismo esilqque odi to obem ei sismiles
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OVERNIGHT AUTO SERVICE
Trial Balance
31 December 2013
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Repair service revenue.
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Insurance expense
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In the next few pages we illustrate several transactions, as well as the related adjust-
ing entries. Both are shown in the format of general journal entries. To help distinguish
between transactions and adjusting entries, transactions are printed in blue and adjusting entries
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ACCRUING INCOME TAXES EXPENSE: tofsymomat 21
THE FINAL ADJUSTING ENTRY
As a corporation earns taxable income, it incurs income taxes expense, and also a liability
to governmental tax authorities. In each country, the tax remittance requirements are not the
same. For Overnight, our illustration assumes several requirements as follows: (a) the tax
liability is paid in four installments called estimated quarterly payments; (b) the first three
payments normally are made on 15 April, 15 June, and 15 September; and (c) the final
payment is not due until 15 January of the following year.
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In its unadjusted trial balance (Exhibit 4-2 on page 147), Overnight shows income taxes
expense of $22,608. This is the income taxes expense recognized from 20 January 2013,
(the date Overnight opened for business) through 30 November 2013. Income taxes accrued
DINER
through 30 September have already been paid. Thus, the $1,560 liability for income taxes
payable represents only the income taxes accrued in October and November.
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The amount of income taxes expense accrued for any given month is only an estimate. The
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expense at 40 percent of taxable income. We also assume that taxable income is equal to
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profit before income taxes, a subtotal often shown in an income statement. This subtotal is
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INTERNATIONAL CASE IN POINT
Corporate income tax rates vary around the world. A recent survey shows that rates mor
range from 9 percent in Montenegro to 55 percent in the United Arab Emirates. The
average tax rate is 25 percent worldwide and 40 percent in the United States.* In
addition to corporate income taxes, some countries also (1) withhold taxes on dividends,
interest, and royalties, (2) charge value-added taxes at specified production and
distribution points, and (3) impose border taxes such as customs and import duties. W
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Busin ses purchase many assets that have a very lo
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In 2013, Overnight earned profit before income taxes of $66,570 (see the income state-
ment in Exhibit 5-2, page 198, in Chapter 5). Therefore, income taxes expense for the entire
year is estimated at $26,628 ($66,570 × 40 percent). Given that income taxes expense
recognized through 30 November amounts to $22,608 (see the unadjusted trial balance
in Exhibit 4-2), an additional $4,020 in income taxes expense must have accrued during
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ecember ($26,628 - $22,608). The adjusting entry to record this
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31 Dec.
Income Taxes Expense
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Adjusting entry to record income taxes accrued in December.
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year ended 31 December 2013. It also increases the liability for
income taxes payable to $5,580 ($1,560 + $4,020). The transaction to record the payment
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6 This assumption enables us to
enables us to accrue income taxes in December in the same manner as in other months.
Otherwise, income taxes for this month would be recorded as a mid-month transaction, rather than in an
end-of-month adjusting entry. The adjusting entry for income taxes is an example of an accrued, but unpaid,
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