Question 4. Muhammad, Hafiz and Fatima started their own business, Lighthouse for Safety and Security Services (LSSS) Inc. On January 1st, 2020, the following normal balances took place at the trial balance of LSSS. Accounts payable RM1,950 Accounts receivable RM13,500 Cash RM74,210 Common stock RM50,000 Land RM4000 Merchandise inventory (24 @ RM265; 1 @ RM260) = 6,620 Prepaid rent RM3,200 Retained earnings RM47,800 Salaries payable RM1,000 Supplies RM200 Unearned revenue RM980 The following transactions took place during 2020 for LSSS: LSSS paid the salaries payable from 2019. On May 1, 2020, LSSS established a RM100 petty cash fund to handle small expenditures. LSSS paid RM4,800 on May 1, 2020, for one year's lease on the company van in advance. LSSS paid RM7,200 on May 2, 2020, for one year's office rent in advance. LSSS purchased RM400 of supplies on account. LSSS purchased 100 alarm systems for RM28,000 cash during the year. Sold 102 alarm systems for RM57,120. All sales were on account. (Compute cost of goods sold using the FIFO cost flow method*) LSSS paid RM2,100 on accounts payable during the year. On August 1, LSSS replenished the petty cash fund. At this time, the petty cash fund had only RM7 of the amount left. It contained the following receipts: office supplies expense RM23, cutting grass RM55, and miscellaneous RM15. Billed RM52,000 of monitoring services for the year. Paid installers and other employees a total of RM25,000 cash for salaries. Collected RM89,300 of accounts receivable during the year. Paid RM3,600 of advertising expense during the year. Paid RM1,100 of utilities expense for the year. LSSS paid other expenses with RM1,400 for Zakat and taxes. Paid a dividend of RM10,000 to the shareholders. The unearned revenue was not earned during the year. Required: Prepare the trial balance for LSSS as of 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.
Question 4.
Muhammad, Hafiz and Fatima started their own business, Lighthouse for Safety and Security Services (LSSS) Inc. On January 1st, 2020, the following normal balances took place at the
- Accounts payable RM1,950
Accounts receivable RM13,500- Cash RM74,210
- Common stock RM50,000
- Land RM4000
- Merchandise inventory (24 @ RM265; 1 @ RM260) = 6,620
- Prepaid rent RM3,200
Retained earnings RM47,800- Salaries payable RM1,000
- Supplies RM200
- Unearned revenue RM980
The following transactions took place during 2020 for LSSS:
- LSSS paid the salaries payable from 2019.
- On May 1, 2020, LSSS established a RM100 petty cash fund to handle small expenditures.
- LSSS paid RM4,800 on May 1, 2020, for one year's lease on the company van in advance.
- LSSS paid RM7,200 on May 2, 2020, for one year's office rent in advance.
- LSSS purchased RM400 of supplies on account.
- LSSS purchased 100 alarm systems for RM28,000 cash during the year.
- Sold 102 alarm systems for RM57,120. All sales were on account.
(Compute cost of goods sold using the FIFO cost flow method*)
- LSSS paid RM2,100 on accounts payable during the year.
- On August 1, LSSS replenished the petty cash fund. At this time, the petty cash fund had only RM7 of the amount left. It contained the following receipts: office supplies expense RM23, cutting grass RM55, and miscellaneous RM15.
- Billed RM52,000 of monitoring services for the year.
- Paid installers and other employees a total of RM25,000 cash for salaries.
- Collected RM89,300 of accounts receivable during the year.
- Paid RM3,600 of advertising expense during the year.
- Paid RM1,100 of utilities expense for the year.
- LSSS paid other expenses with RM1,400 for Zakat and taxes.
- Paid a dividend of RM10,000 to the shareholders.
- The unearned revenue was not earned during the year.
Required:
Prepare the trial balance for LSSS as of 31st December 2020.
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