The following pre‐adjustment trial balance appeared in the books of Musketeer Traders at the end of their financial year 30 September 2019. Ignore VAT. (25) Folio Debit(R) Credit(R) Statement of financial position section Capital 400 000 Drawings 5 500 Land and Buildings 450 000 Motor Vehicles 225 000 Accumulated depreciation: Vehicles 65 000 Financial Asset: Fixed deposit : JP House 107 000 Bank 3 200 Debtors control 48 220 Trading Inventory 24 640 Mortgage Loan 210 520 Creditors Control 33 980 Nominal Accounts Section Sales 1 200 000 Sales Returns 18 800 Cost of Sales 800 340 Rent Income 45 000 Interest Income 4 600 Service Income 8 700 Rent Expense 66 700 20 2020 © The Independent Institute of Education (Pty) Ltd 2020 Page 4 of 14 Folio Debit(R) Credit(R) Credit Losses 3 500 Wages and Salaries 102 380 Cleaning Materials 6 300 Office consumables 5 400 Interest on mortgage loan 2 500 Electricity 11 250 Rates and services 4 870 Fuel 12 300 Advertising 50 700 Telephone 25 600 1 971 000 1 971 000 Additional information and adjustments as at 30 September 2019: 1. The stock take revealed the following items on hand: ‐ Trading Inventory – R 11 000 ‐ Office consumables – R 340 2. Depreciation must be provided for on vehicles at 25% per annum according to the straight‐line method. No vehicles were bought or sold during the year. 3. The following adjustments must be made to enforce the accrual concept: ‐ Wages and salaries payable – R 6 000 ‐ Telephone prepaid for October 2019 – R 1 300 ‐ Rent income received in advance – R 3 500 ‐ Accrued interest on fixed deposit – R 5 350 4. Create an allowance for credit losses to the amount of R 870. Required: Prepare the post adjustment trial balance of Musketeer Traders on 30 September 2019.
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 pre‐adjustment
Traders at the end of their financial year 30 September 2019. Ignore VAT.
(25)
Folio Debit(R) Credit(R)
Capital 400 000
Drawings 5 500
Land and Buildings 450 000
Motor Vehicles 225 000
Financial Asset: Fixed deposit : JP
House
107 000
Bank 3 200
Debtors control 48 220
Trading Inventory 24 640
Mortgage Loan 210 520
Creditors Control 33 980
Nominal Accounts Section
Sales 1 200 000
Sales Returns 18 800
Cost of Sales 800 340
Rent Income 45 000
Interest Income 4 600
Service Income 8 700
Rent Expense 66 700
20 2020
© The Independent Institute of Education (Pty) Ltd 2020
Page 4 of 14
Folio Debit(R) Credit(R)
Credit Losses 3 500
Wages and Salaries 102 380
Cleaning Materials 6 300
Office consumables 5 400
Interest on mortgage loan 2 500
Electricity 11 250
Rates and services 4 870
Fuel 12 300
Advertising 50 700
Telephone 25 600
1 971 000 1 971 000
Additional information and adjustments as at 30 September 2019:
1. The stock take revealed the following items on hand:
‐ Trading Inventory – R 11 000
‐ Office consumables – R 340
2. Depreciation must be provided for on vehicles at 25% per annum according to the
straight‐line method. No vehicles were bought or sold during the year.
3. The following adjustments must be made to enforce the accrual concept:
‐ Wages and salaries payable – R 6 000
‐ Telephone prepaid for October 2019 – R 1 300
‐ Rent income received in advance – R 3 500
‐ Accrued interest on fixed deposit – R 5 350
4. Create an allowance for credit losses to the amount of R 870.
Required:
Prepare the post adjustment trial balance of Musketeer Traders on 30 September 2019.
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