Problem 3 On December 31, Hartley Enterprises prepared the following adjusted trial balance. Journalize the closing entries (template on the next page). Hartley Enterprises Trial Balance December 31, 2020 Cash 4,000 Accounts Receivable 12,500 Merchandise Inventory 8,950 Store Supplies 550 Office Supplies 300 Prepaid Insurance 750 Store Equipment 33,000 Accumulated Depreciation-Store Equipment 14,895 Office Equipment 9,000 Accumulated Depreciation-Office Equipment 5,000 Accounts Payable 9,000 Salaries Payable 200 Notes Payable 18,000 J. D. Hartley, Capital 25,300 J. D. Hartley, Drawing 16,000 Sales 29,900 Sales Returns and Allowances 250 Sales Returns 200 Interest Income 55 Purchases 10,950 Purchase Discounts 200 Freight-In 550 Salary Expense 3,500 Store Supplies Expense 650 Office Supplies Expense 475 Insurance Expense 525 Depreciation Expense-Store Equipment 400 Depreciation Expense-Office Equipment 450 Totals 102,550 102.550
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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