The following is the adjusted trial balance of ABC Merchandising Ltd., for the year ended December 31, 2017. Trial Balance of ABC Merchandising December 31, 2017 Cash 24,000 Accounts Receivables 52,000 Office Supplies 5,000 Prepaid Insurance 6,000 Inventories 222,000 Land 800,000 Property, Plant & Equipment (PP&E) 800,000 Delivery Van 300,000 Investment in Shares of Sonata Ltd. 80,000 Accumulated Depreciation, PP&E 240,000 Accumulated Depreciation, Delivery Van 60,000 Share Capital 1,100,000 Retained Earnings 554,000 Accounts Payable 24,000 Bonds Payable 150,000 6 months Loans Payable 100,000 Sales 1,460,000 Administrative travel expense 10,000 Sales Returns and Allowances 6,000 Advertisement 3,000 Cost of Goods Sold 940,000 Freight cost 8,000 Legal Expense 52,000 Salary Expense 48,000 Sales Commission Expense 25,000 Entertainment Expense 110,000 Depreciation Expense, PP&E 104,000 Depreciation Expense Delivery Van 60,000 Loss on Sale Delivery Van 2,200 Gain on sale of land 80,000 Rent Expense 18,000 Utilities Expense 4,800 Supplies Expense 5,000 Insurance Expense 8,000 Income tax expense 75,000 Total 3,770,000 3,770,000 Required: Prepare an Income Statement and Statement of Change of Equity for 2017 and a Balance Sheet as on December 31, 2017
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 is the adjusted
December 31, 2017.
Trial Balance of ABC Merchandising
December 31, 2017
Cash 24,000
Accounts Receivables 52,000
Office Supplies 5,000
Prepaid Insurance 6,000
Inventories 222,000
Land 800,000
Property, Plant & Equipment (PP&E) 800,000
Delivery Van 300,000
Investment in Shares of Sonata Ltd. 80,000
Accumulated
Accumulated Depreciation, Delivery Van 60,000
Share Capital 1,100,000
Retained Earnings 554,000
Accounts Payable 24,000
Bonds Payable 150,000
6 months Loans Payable 100,000
Sales 1,460,000
Administrative travel expense 10,000
Sales Returns and Allowances 6,000
Advertisement 3,000
Cost of Goods Sold 940,000
Freight cost 8,000
Legal Expense 52,000
Salary Expense 48,000
Sales Commission Expense 25,000
Entertainment Expense 110,000
Depreciation Expense, PP&E 104,000
Depreciation Expense Delivery Van 60,000
Loss on Sale Delivery Van 2,200
Gain on sale of land 80,000
Rent Expense 18,000
Utilities Expense 4,800
Supplies Expense 5,000
Insurance Expense 8,000
Income tax expense 75,000
Total 3,770,000 3,770,000
Required:
Prepare an Income Statement and Statement of Change of Equity for 2017 and a Balance Sheet
as on December 31, 2017
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