Subject: Recording Business Transactions according to US GAAP. Consider a hypothetical firm with unadjusted trial balance at December 31as shown below: Cash Accounts receivable Land Building Furniture Computer Note payable Accounts payable Cap stock Revenue Electricity expense Salary expense TOTAL Unadjusted trial balance Feb 28 20700 3000 20000 40000 6000 2400 500 2000 94600 At December 31, the company has to record the following transactions Revenues obtained during the las 10 months: $250,000.00 all paid in cash All expenses of the company during the last 10 months for $58,000 55000 5000 30000 4600 94600 The $55,000 note payable has been issued on January 1 and bears 10% interest rate. Interests are paid every 1st of January. No repayment of the principal has been made The building has a useful life of 30 years, an estimated salvage value of $5,000 Students are requested to: 1. Prepare the last entries of the year on the journal (revenues and expenses, adjusting entries) 2. Prepare the closing entries. 3. The balance sheet of the company closed at December 31.
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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