Question: On May 1, company collected $20,000 as rent for one year from a tenant and a liability account was credited. Provide the adjusting journal entry that would be made on July 31, 2021, the end of the fiscal year.
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.
| A | Accounts Payable | AA | Losses due to fire |
| B | BB | Merchandise Inventory | |
| E | EE | Notes Payable | |
| F | Allowance for Doubtful Accounts | FF | Payroll Tax Expense |
| G | GG | Premium on Bonds Payable | |
| H | Bonds Payable | HH | Prepaid Insurance |
| I | Building | II | Prepaid Rent |
| J | Capital Lease Payable | JJ | Rent Expense |
| K | Cash | KK | Rent Revenue |
| L | Cost of Goods Sold | LL | |
| M | Depreciation Expense | MM | Salaries and Wages Expense |
| N | Discount on Bonds Payable | NN | Salaries and Wages Payable |
| O | Dividends | OO | Sales Commission Expense |
| P | Equipment | PP | Sales Commission Payable |
| Q | Fed Income Tax Payable | Sales Returns | |
| R | Fed |
RR | Sales Revenues |
| S | FICA Taxes Payable | SS | Sales Taxes Payable |
| T | Income Summary | TT | Service Revenue |
| U | Insurance Expense | UU | State Income Tax Payable |
| V | Interest Expense | VV | State Unemployment Tax Payable |
| W | Interest Payable | WW | Supplies |
| X | Interest Receivable | XX | Supplies Expense |
| Y | Interest Revenue | YY | Unearned Rent Revenue |
| Z | Land | ZZ | Unearned Service Revenue |
Examole of
Where K denotes Cash account, 3000 is the amount, D stands for debit, B denotes Accounts Receivable, 2000 is the amount, D stands for debit, TT denotes Service Revenues, 5000 is the amount, and C stands for credit. The letters are in capital. Comma is used to separate the changes in each account. Don’t use dollar sign, decimal point, or space in any place. If in an entry requires more than one debit or credit accounts, first enter debit accounts in order of dollar amount – large amount to small amount, then the credit accounts in order of dollar amount – large amount to small amount.
Question: On May 1, company collected $20,000 as rent for one year from a tenant and a liability account was credited. Provide the
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