The December 31, 2021, unadjusted trial balance for the Wolkstein Drug Company is presented below. December 31 is the company’s year-end reporting date. Account Title Debits Credits Cash 77,610 Accounts receivable 20,750 Prepaid rent 2,200 Inventory 31,250 Equipment 54,000 Accumulated depreciation 16,200 Accounts payable 21,000 Salaries payable 0 Common stock 100,000 Retained earnings 11,500 Sales revenue 343,000 Cost of goods sold 205,800 Salaries expense 68,600 Rent expense 13,200 Depreciation expense 0 Utilities expense 13,720 Advertising expense 4,570 Totals 491,700 491,700 The following year-end adjusting entries are required: Depreciation expense for the year on the equipment is $5,400. Salaries at year-end should be accrued in the amount of $4,520. Prepare an income statement for 2021 and a balance sheet as of December 31, 2021
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.
The December 31, 2021, unadjusted
| Account Title | Debits | Credits | |
| Cash | 77,610 | ||
| 20,750 | |||
| Prepaid rent | 2,200 | ||
| Inventory | 31,250 | ||
| Equipment | 54,000 | ||
| 16,200 | |||
| Accounts payable | 21,000 | ||
| Salaries payable | 0 | ||
| Common stock | 100,000 | ||
| 11,500 | |||
| Sales revenue | 343,000 | ||
| Cost of goods sold | 205,800 | ||
| Salaries expense | 68,600 | ||
| Rent expense | 13,200 | ||
| Depreciation expense | 0 | ||
| Utilities expense | 13,720 | ||
| Advertising expense | 4,570 | ||
| Totals | 491,700 | 491,700 | |
The following year-end
- Depreciation expense for the year on the equipment is $5,400.
- Salaries at year-end should be accrued in the amount of $4,520. Prepare an income statement for 2021 and a
balance sheet as of December 31, 2021.
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