Recording Seven Typical Adjusting Entries Dittman’s Variety Store is completing the accounting process for the year just ended, December 31, 2011. The transactions during 2011 have been journalized and posted. The following data with respect to adjusting entries are available: a. Wages earned by employees during December 2011, unpaid and unrecorded at December 31, 2011, amounted to $2,700. The last payroll was December 28; the next payroll will be January 6, 2012. b. Office supplies on hand at January 1, 2011, totaled $450. Office supplies purchased and debited to Office Supplies during the year amounted to $500. The year-end count showed $275 of supplies on hand. c. One-fourth of the basement space is rented to Heald’s Specialty Shop for $560 per month, payable monthly. On December 31, 2011, the rent for November and December 2011 had not been collected or recorded. Collection is expected January 10, 2012. d. The store used delivery equipment that cost $60,500; $12,100 was the estimated depreciation for 2011.
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.
Recording Seven Typical
Dittman’s Variety Store is completing the accounting process for the year just ended, December 31,
2011. The transactions during 2011 have been journalized and posted. The following data with respect to
adjusting entries are available:
a. Wages earned by employees during December 2011, unpaid and unrecorded at December 31, 2011,
amounted to $2,700. The last payroll was December 28; the next payroll will be January 6, 2012.
b. Office supplies on hand at January 1, 2011, totaled $450. Office supplies purchased and debited to Office
Supplies during the year amounted to $500. The year-end count showed $275 of supplies on hand.
c. One-fourth of the basement space is rented to Heald’s Specialty Shop for $560 per month, payable
monthly. On December 31, 2011, the rent for November and December 2011 had not been collected
or recorded. Collection is expected January 10, 2012.
d. The store used delivery equipment that cost $60,500; $12,100 was the estimated
2011.
e. On July 1, 2011, a two-year insurance premium amounting to $2,400 was paid in cash and debited in
full to Prepaid Insurance. Coverage began on July 1, 2011.
f. The remaining basement of the store is rented for $1,600 per month to another merchant, M. Carlos,
Inc. Carlos sells compatible, but not competitive, merchandise. On November 1, 2011, the store collected
six months’ rent in the amount of $9,600 in advance from Carlos; it was credited in full to
Unearned Rent Revenue when collected.
g. Dittman’s Variety Store operates a repair shop to meet its own needs. The shop also does repairs for
M. Carlos. At the end of December 31, 2011, Carlos had not paid $800 for completed repairs. This
amount has not yet been recorded as Repair Shop Revenue. Collection is expected during January
2012.
Required:
1. Identify each of these transactions as a deferred revenue, deferred expense, accrued revenue, or
accrued expense.
2. Prepare the adjusting entries that should be recorded for Dittman’s Variety Store at December 31,
2011.
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