Save-Mart was a retail store. Its account balances on February 28 (the end of its fiscal year), before adjust- ments, were as shown below. Debit Balances Credit Balances Cash Accounts receivable Merchandise inventory Store equipment Supplies inventory Prepaid insurance Selling expense Sales salaries Accumulated depreciation on store equipment $ 88,860 127,430 903,130 70,970 11,420 Notes payable Accounts payable 88,500 88,970 17,480 12,430 10,880 47,140 18,930 3,340 7,100 3,400 $1,311,090 Common stack 100,000 33,500 988,700 Retained earnings Sales Miscellaneous general expense Sales discounts Interest expense Social Security tax expense Total Total $1,311,090 The data for the adjustments are 7. The statement sent by the bank, adjusted for checks outstanding, showed a balance of $88,110. The dif- ference represented bank service charges. 1. Cost of merchandise sold, $604,783. 2. Store equipment had a useful life of seven years. (All equipment was less than seven years old.) 3. Supplies inventory, February 28, $3,877. (Pur- chases of supplies during the year were debited to the Supplies Inventory account.) 4. Expired insurance, $7,125. 5. The note payable was at an interest rate of 9 per- cent, payable monthly. It had been outstanding throughout the year. 6. Sales salaries earned but not paid to employces, $2.340 Questions 1. Set up T accounts with the balances given above. 2. Journalize and post adjusting entries, adding other T accounts as necessary. 3. Journalize and post closing entries. 4. Prepare an income statement for the year and a bal- ance sheet as of Fehruary 28.
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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