Olorato’s trial balance as at 31st December 2020 Dr Cr Pula Pula Sales 800,000 Sales Returns 17,000 Purchases 400,000 Purchases Returns 21,000 Land and Buildings 320,000 Machinery 275,000 Motor vehicle 130,000 Furniture 65,000 Opening inventory 50,000 Accounts receivable 220,000 Accounts payable 276,000 Capital 650,000 Cash at Bank 30,000 Cash in hand 3,000 Telephone 12,000 Electricity 15,000 Salaries and wages 170,000 Discounts receivable 3,500 Discounts Allowed 2,000 Interest receivable 9,000 Interest payable 12,000 General expenses 28,000 Insurance 6,000 Bad debts 1,000 Provision for bad and doubtful debts 4,500 Carriage outwards 3,000 Carriage inwards 5,000 1,764,000.0 1,764,000 Additional information a. Closing inventory P40,000 b. Motor vehicles purchased P10, 000 was included in Purchases by mistake. c. Electricity P1, 000 was owing at the end of the financial year. d. Telephone bill was outstanding P2, 000. e. Salaries and wages P20, 000 was paid in advance f. Insurance of P1, 000 was paid in advance. g. Depreciate non-current assets by 20%. h. Provision for doubtful debts is 2% of accounts receivable. Required: a. Prepare the Statement of Comprehensive Income for the year ended 31st December 2020. b. Prepare the Statement of Financial Position as at 31st December 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.
Olorato’s
Dr Cr
Pula Pula
Sales 800,000
Sales Returns 17,000
Purchases 400,000
Purchases Returns 21,000
Land and Buildings 320,000
Machinery 275,000
Motor vehicle 130,000
Furniture 65,000
Opening inventory 50,000
Accounts payable 276,000
Capital 650,000
Cash at Bank 30,000
Cash in hand 3,000
Telephone 12,000
Electricity 15,000
Salaries and wages 170,000
Discounts receivable 3,500
Discounts Allowed 2,000
Interest receivable 9,000
Interest payable 12,000
General expenses 28,000
Insurance 6,000
Provision for bad and
doubtful debts 4,500
Carriage outwards 3,000
Carriage inwards 5,000
1,764,000.0 1,764,000
Additional information
a. Closing inventory P40,000
b. Motor vehicles purchased P10, 000 was included in Purchases by mistake.
c. Electricity P1, 000 was owing at the end of the financial year.
d. Telephone bill was outstanding P2, 000.
e. Salaries and wages P20, 000 was paid in advance
f. Insurance of P1, 000 was paid in advance.
g.
h. Provision for doubtful debts is 2% of accounts receivable.
Required:
a. Prepare the Statement of Comprehensive Income for the year ended 31st December
2020.
b. Prepare the Statement of Financial Position as at 31st December 2020.
Step by step
Solved in 4 steps
