QUESTION NO 1: Nayatel is a Premium Triple Play (Internet, Cable TV, Phone) Service provider. High Speed FTTH Internet Infrastructure in Islamabad, Rawalpindi, Faisalabad and many other cities of Pakistan. All members pay in advance to be listed in the database. Advance payments are credited to an account entitled Unearned Member Dues. Adjusting entries are performed on a monthly basis. An unadjusted trial balance dated December 31, 2018, follows. (Bear in mind that adjusting entries have already been made for the first 11 months of 2018, but not for December.) Adjusting entries Data: Records show that Rs.2500 in Broad band revenue had not yet been billed or recorded as of December 31. Record shows that Rs.10,000 of cash receipts originally recorded as unearned revenue had been earned as of Dec 31, 2018. All Computer equipments were purchased when the business first formed. The estimated life of equipment at that time was three years (36 months). Nayatel paid Rs.21900 rent on November 01, 2018 the through January 31, 2019. Office supplies on hand at December 31 amount to Rs.440. On March 01, 2018, the company borrowed Rs.100,000 by signing a 12 months, 10 percent note payable. The entire note plus 12 months accrued interest is due on march 01, 2019. Estimated income tax expense for entire year totals Rs.16000. Taxes are due in the first quarter of 2019. NAYATEL UNADJUSTED TRIAL BALANCE DECEMBER 31, 2018 Unadjusted Trial Balance Adjusting Entries Adjusted Trial Balance S. No Particulars Dr Cr Dr Cr Dr Cr 01 Cash Rs.169500 02 Unexpired Insurance 12800 03 Prepaid rent 14600 04 Office supplies 2160 05 Computer Equipments 108000 06 Accumulated Depreciation: Computer equipment 54000 07 Accounts payable 4300 08 Notes payable 90000 09 Interest payable 6750 10 Income tax payable 7500 11 Unearned member dues 36000 12 Capital stock 40000 13 Retained Earnings 28000 14 Client fees earned 508450 15 Advertising expense 17290 16 Insurance expense 35200 17 Rent expense 80300 18 Office supplies expense 15400 19 Internet connection expense 27000 20 Depreciation expense: Computer equipment 33000 21 Salaries expense 239000 22 Interest expense 6750 23 Income Tax expense 14000 Total 772000 775000 Required: Prepare the necessary Adjusting entries for each of the above transaction. Prepare Adjusted Trial Balance with the help of worksheet given above.
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 NO 1:
Nayatel is a Premium Triple Play (Internet, Cable TV, Phone) Service provider. High Speed FTTH Internet Infrastructure in Islamabad, Rawalpindi, Faisalabad and many other cities of Pakistan. All members pay in advance to be listed in the database. Advance payments are credited to an account entitled Unearned Member Dues.
Adjusting entries Data:
- Records show that Rs.2500 in Broad band revenue had not yet been billed or recorded as of December 31.
- Record shows that Rs.10,000 of cash receipts originally recorded as unearned revenue had been earned as of Dec 31, 2018.
- All Computer equipments were purchased when the business first formed. The estimated life of equipment at that time was three years (36 months).
- Nayatel paid Rs.21900 rent on November 01, 2018 the through January 31, 2019.
- Office supplies on hand at December 31 amount to Rs.440.
- On March 01, 2018, the company borrowed Rs.100,000 by signing a 12 months, 10 percent note payable. The entire note plus 12 months accrued interest is due on march 01, 2019.
- Estimated income tax expense for entire year totals Rs.16000. Taxes are due in the first quarter of 2019.
NAYATEL
UNADJUSTED TRIAL BALANCE
DECEMBER 31, 2018
|
Unadjusted Trial Balance |
Adjusting Entries |
Adjusted Trial Balance |
|||||
|
S. No |
Particulars |
Dr |
Cr |
Dr |
Cr |
Dr |
Cr |
|
01 |
Cash |
Rs.169500 |
|
|
|
|
|
|
02 |
Unexpired Insurance |
12800 |
|
|
|
|
|
|
03 |
Prepaid rent |
14600 |
|
|
|
|
|
|
04 |
Office supplies |
2160 |
|
|
|
|
|
|
05 |
Computer Equipments |
108000 |
|
|
|
|
|
|
06 |
|
|
54000 |
|
|
|
|
|
07 |
Accounts payable |
|
4300 |
|
|
|
|
|
08 |
Notes payable |
|
90000 |
|
|
|
|
|
09 |
Interest payable |
|
6750 |
|
|
|
|
|
10 |
Income tax payable |
|
7500 |
|
|
|
|
|
11 |
Unearned member dues |
|
36000 |
|
|
|
|
|
12 |
Capital stock |
|
40000 |
|
|
|
|
|
13 |
|
|
28000 |
|
|
|
|
|
14 |
Client fees earned |
|
508450 |
|
|
|
|
|
15 |
Advertising expense |
17290 |
|
|
|
|
|
|
16 |
Insurance expense |
35200 |
|
|
|
|
|
|
17 |
Rent expense |
80300 |
|
|
|
|
|
|
18 |
Office supplies expense |
15400 |
|
|
|
|
|
|
19 |
Internet connection expense |
27000 |
|
|
|
|
|
|
20 |
Depreciation expense: Computer equipment |
33000 |
|
|
|
|
|
|
21 |
Salaries expense |
239000 |
|
|
|
|
|
|
22 |
Interest expense |
6750 |
|
|
|
|
|
|
23 |
Income Tax expense |
14000 |
|
|
|
|
|
|
|
Total |
772000 |
775000 |
|
|
|
|
Required:
- Prepare the necessary Adjusting entries for each of the above transaction.
- Prepare Adjusted Trial Balance with the help of worksheet given above.
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