The following information pertains to Direct Projects Ltd for the three months ended 31 December 2020. Actual October Budgeted November Budgeted December Revenue (20% for cash and 80% on credit) 360 000,00 380 000,00 400 000,00 Purchases (10% for cash 90% on credit) 240 000,00 280 000,00 320 000,00 Salaries and wages paid 40 000,00 60 000,00 60 000,00 Cash expenses 24 000,00 28 000,00 32 000,00 Depreciation
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 following information pertains to Direct Projects Ltd for the three months ended 31 December 2020.
|
Actual October |
Budgeted November |
Budgeted December |
|
|
Revenue (20% for cash and 80% on credit) |
360 000,00 |
380 000,00 |
400 000,00 |
|
Purchases (10% for cash 90% on credit) |
240 000,00 |
280 000,00 |
320 000,00 |
|
Salaries and wages paid |
40 000,00 |
60 000,00 |
60 000,00 |
|
Cash expenses |
24 000,00 |
28 000,00 |
32 000,00 |
|
|
2 000,00 |
2 000,00 |
2 000,00 |
Additional information:
- It is expected that debtors will settle their accounts as follows:
- 20% in the month of invoice
- 70% in the month after the month of invoice, and
- 5% in the second month after the month of invoice.
- The remaining 5% is usually written off as
bad debts.
- Trade creditors are paid in the month after the purchases at a discount of 5%.
- 50% of the salaries and wages are weekly wages. Because wages are paid weekly, usually 10% of the wages are paid in the month following the month in which they were incurred.
- Expenses are paid as they arise.
- The favourable bank balance on 1 November 2020 was R 16 000.
Questions to be answered:
1.1 Prepare the
1.2 Discuss how the budgeting process in an organisation benefits a functioning
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