Requirement 1. Journalize the adjusting entries. (Record debits first, then credits. Exclude explanations from any journal entries.) a. Prepaid insurance, beginning, $700. Payments for insurance during the period, $2,300. Prepaid insurance, ending, $800. Journal Entry Accounts Credit Debit 2,200 a. Insurance Expense Prepaid Insurance b. Interest revenue accrued, $2,700. Journal Entry Accounts Debit 2,700 b. Interest Receivable Interest Revenue 2,700 c. Unearned service revenue, beginning, $2,000. Unearned service revenue, ending, $500. Journal Entry Accounts Debit Credit C. Unearned Service Revenue 1,500 Service Revenue d. Depreciation on building, $5,700. Accounts Debit 5,700 d. Depreciation Expense Accumulated Depreciation 5,700 e. Employees' salaries owed for two days of a five-day work week; weekly payroll, $22,000. Journal Entry Accounts Credit Debit 8,800 Salary Expense Salary Payable f. Income before income tax, $27,000. Income tax rate is 35%. Journal Entry Accounts Debit 9,450 f. Income Tax Expense Income Tax Payable 9,450 Requirement 2. Suppose the adjustments were not made. Calculate the overall overstatement or understatement of net income resulting from the omission of these adjustments. Enter the amounts of either the overstatement or understatement of net income as a result of omitting these adjustments. (Use parentheses or a minus sign when entering understatemer Net Income over (under) statement as a result of omission Insurance Expense Interest Revenue Service Revenue Depreciation Expense Salary Expense Income Tax Expense Total over (under) statement of net income Journal Entry 2,200 Credit 1,500 Credit (2,700) 9,450 8,800 Credit
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.
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