Prepare the journal entry for the reversal of the balance on the last day of adjustment and post it to the general ledger accounts from the information I to iv provided above (Must have T account and reversal of balance)
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.
Eng Hardwares has the following balance as at 30 November 2020:
Accounts RM’000
Wages(Debit) 110,000
Insurance (Debit) 2,000
Rental (Credit) 50,000
4
Additional information:
i. Eng Hardwares pays wages to its workers at the end of every month. However,
some internal problems arise and it did not pay wages amounting to RM10,000 to its
workers on time on the last day of December 2020.
ii. It paid RM10,000 for insurance covered from period December 2020 until March
2021 on 3rd December 2020.
iii. It rents out part of its warehouse to another business for RM2,000 per month and
receives the rent on the last day of each quarter on 31st March, 30th June, 30th
September, and 31st December. However, the tenant has some financial difficulties
and failed to pay the three-month rent from October 2020 to December 2020 on 31
December, 2020.
iv. On 1 December 2020 it received RM21,600 for a one year rental from a new tenant.
Required:-
Prepare the
and post it to the general ledger accounts from the information I to iv provided above
(Must have T account and reversal of balance)
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