P2-3 (Algo) Recording Transactions in T-Accounts, Preparing the Balance Sheet from a Trial Balance, and Evaluating the Current Ratio LO2-2, 2-4, 2-5 (GL) Jaguar Plastics Company has been operating for three years. At December 31 of last year, the accounting records reflected the following: Cash Investments (short-term) Accounts receivable Inventory Notes receivable (long-term) Equipment Factory building Intangibles $27,000 Accounts payable 2,300 Accrued liabilities payable. 3,300 Notes payable (current) 33,000 Notes payable (noncurrent) 1,600 Common stock 55,000 Additional paid-in capital 90,000 Retained earnings 5,000 During the current year, the company had the following summarized activities: $23,000 3,200 7,700 47,000 10,500 94,500 31,300 a. Purchased short-term investments for $8,200 cash. b. Lent $6,300 to a supplier who signed a two-year note. c. Purchased equipment that cost $19,000; paid $4,500 cash and signed a one-year note for the balance. d. Hired a new president at the end of the year. The contract was for $76,000 per year plus options to purchase company stock at a set price based on company performance. The new president begins her position on January 1 of next year. e. Issued an additional 2,500 shares of $0.50 par value common stock for $14,000 cash. f. Borrowed $12,000 cash from a local bank, payable in three months. g. Purchased a patent (an intangible asset) for $2,500 cash. h. Built an addition to the factory for $30,000; paid $7,900 in cash and signed a three-year note for the balance. i. Returned defective equipment to the manufacturer, receiving a cash refund of $1,000.
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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