REQUIRED (show supporting calculations): 1. Prepare the adjusting entries on January 31 if the company makes use of the asset/liability method. 2. Prepare the adjusting entries on January 31 if the company makes use of the expense/revenue method.
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.
Hye Jin started his accounting consultancy business on January 1, 2021. During the first month of the business, the following transactions occurred:
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Hye Jin purchased a laptop on January 1, 2021 for P50,000. 30% of the purchase price was paid in cash, the balance was subject to a 2-year note at 3% interest.
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Vera expects that the laptop will be used in the business for 3 years.
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On January 5, Vera received P12,000 for services to be rendered on the succeeding 4 months.
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On January 3, Vera purchased a 1-year insurance policy for P24,000.
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Office supplies purchased cost P15,000. A count of supplies at month-end indicates P12,000 supplies are on hand.
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On January 31, Hye Jin received a bill from the lessor for January rent amounting to P16,000, and utilities amounting to P4,000.
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Services performed to clients but were not yet billed amounted to P7,850.
REQUIRED (show supporting calculations):
1. Prepare the
method.
2. Prepare the adjusting entries on January 31 if the company makes use of the expense/revenue method.
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