The following trial balance for Kids Play does not balance and the owner is concerned and has passed it to you for review and adjustments where applicable: Trial Balance June 30th, 2013 Account Debit Credit Cash 6,600 Accounts receivable 8,000 Supplies 600 Motor vehicle 89,000 Accounts payable 55,000 Marlon Morgan: Capital 50,700 Marlon Morgan: withdrawal 2,300 Service revenue 4,500 Salary 4,100 Rent 800 111,400 110,200 You have now been presented with the following list of errors and have been asked to prepare the adjusted trial balance: (journal entries are not required) Cash was understated by $2,000 A $1,000 debit to accounts receivable was posted as a credit. A $1,400 purchase of supplies on account was omitted from the company’s books. Motor Vehicle cost should have been $84,300 instead of $89,000 Salary expense was overstated by $500
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
Trial Balance
June 30th, 2013
|
Account |
Debit |
Credit |
|
Cash |
6,600 |
|
|
|
8,000 |
|
|
Supplies |
600 |
|
|
Motor vehicle |
89,000 |
|
|
Accounts payable |
|
55,000 |
|
Marlon Morgan: Capital |
|
50,700 |
|
Marlon Morgan: withdrawal |
2,300 |
|
|
Service revenue |
|
4,500 |
|
Salary |
4,100 |
|
|
Rent |
800 |
|
|
|
111,400 |
110,200 |
You have now been presented with the following list of errors and have been asked to prepare the adjusted trial balance: (
- Cash was understated by $2,000
- A $1,000 debit to accounts receivable was posted as a credit.
- A $1,400 purchase of supplies on account was omitted from the company’s books.
- Motor Vehicle cost should have been $84,300 instead of $89,000
- Salary expense was overstated by $500
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