Open, post to and balance the appropriation account in the general ledger of Newcastle Enterprises for the year ended 29 February 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.
The following information was taken from the books of Newcastle Enterprises.
Balances in the general ledger of Newcastle Enterprises for the financial year ended
29 February 2020.
Account Fol. Debit(R) Credit(R)
Capital: M. Manchester(1 March
2019)
50 000
Capital: L. Liverpool (1 March
2019)
70 000
Current: M. Manchester (1 March
2019)
18 000
Current: L. Liverpool (1 March
2019)
8 000
Drawings: M. Manchester 5 000
Drawings: L. Liverpool 4 000
Replacement Reserve 65 000
Property, plant and equipment 670 000
Appropriations according to the
29 February 2020:
1. Interest on capital must be appropriated at 5% per annum. Capital account
balances remain constant.
2. Interest on drawings must be appropriated at 12% per annum. Assume
drawings were made 3 months prior to the end of the financial year.
3. Interest on current accounts must be appropriated at 7% per annum (on
opening balances).
4. Both partners must receive an annual salary at the end of the financial year
as follows:
- M. Manchester – R65 000
- L. Liverpool – R45 000
5. L. Liverpool must receive an annual bonus of R10 000 at the end of the
financial year.
6. R35 000 must be transferred to the replacement reserve at the end of the
financial year.
7. The remaining profit must be split between the partners in the following
ratio:
M. Manchester: 5
L. Liverpool: 3
Required:
Open, post to and balance the appropriation account in the general ledger of
Newcastle Enterprises for the year ended 29 February 2020.
(Round to 2 decimal places)
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