The following transactions occurred during December 31, 2024, for the Microchip Company. 1. On October 1, 2024, Microchip lent $102,500 to another company. A note was signed with principal and 8% interest to be paid on September 30, 2025. 2. On November 1, 2024, the company paid its landlord $4,400 representing rent for the months of November through January. Prepaid rent was debited at the time of payment. 3. On August 1, 2024, collected $8,800 in advance rent from another company that is renting a portion of Microchip's factory. The $8,800 represents one year's rent and the entire amount was credited to deferred rent revenue at the time cash was received. 4. Depreciation on office equipment is $3,300 for the year. 5. Vacation pay for the year that had been earned by employees but not paid to them or recorded is $6,800. The company records vacation pay as salaries expense. 6. Microchip began the year with $1,600 in its asset account, supplies. During the year, $5,700 in supplies were purchased and debited to supplies. At year-end, supplies costing $2,850 remain on hand. Required: 1. & 2. If Microchip's accountant employed reversing entries for accruals, prepare the adjusting entries at the end of 2024 for only those entries that would be reversed. 3. Prepare the appropriate reversing entries at the beginning of 2025.
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.
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