The financial year for Drip Dry Cleaning Services ends on 30 June. Using the following information, make the necessary adjusting entries at year-end. Ignore GST. On 15 February, Danielle Drip’s business borrowed $16 000 from Northern Bank at 8% interest. The principal and interest are payable on 15 August. Rent of $3600 for the 6-month period ending 31 July is due to be paid in August. The annual depreciation on equipment is estimated to be $7200. The 1 July balance in the Accumulated Depreciation account was $15 600. Drip Dry Cleaning Services purchased a 1-year insurance policy on 1 March of the current year for $660. A 3-year policy was purchased on 1 November of the previous year for $2700. Both purchases were recorded by debiting Prepaid Insurance. The business has two part-time employees who each earn $220 a day. They both worked the last 3 days in June for which they have not yet been paid. On 1 June, the Highup Hotel paid the business $2100 in advance for doing their dry cleaning for the next 3 months. This was recorded by a credit to Unearned Dry Cleaning Revenue. Water for June of $850 is unpaid and unrecorded. The supplies account had a $280 debit balance on 1 July. Supplies of $1560 were purchased during the year and $190 of supplies are on hand as at 30 June.
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 financial year for Drip Dry Cleaning Services ends on 30 June. Using the following information, make the necessary
- On 15 February, Danielle Drip’s business borrowed $16 000 from Northern Bank at 8% interest. The principal and interest are payable on 15 August.
- Rent of $3600 for the 6-month period ending 31 July is due to be paid in August.
- The annual
depreciation on equipment is estimated to be $7200. The 1 July balance in theAccumulated Depreciation account was $15 600. - Drip Dry Cleaning Services purchased a 1-year insurance policy on 1 March of the current year for $660. A 3-year policy was purchased on 1 November of the previous year for $2700. Both purchases were recorded by debiting Prepaid Insurance.
- The business has two part-time employees who each earn $220 a day. They both worked the last 3 days in June for which they have not yet been paid.
- On 1 June, the Highup Hotel paid the business $2100 in advance for doing their dry cleaning for the next 3 months. This was recorded by a credit to Unearned Dry Cleaning Revenue.
- Water for June of $850 is unpaid and unrecorded.
- The supplies account had a $280 debit balance on 1 July. Supplies of $1560 were purchased during the year and $190 of supplies are on hand as at 30 June.
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