The following Trial Balance is extracted from the books of a merchant on 31 December 2014. Particulars Debit (Rs) Credit (Rs) 3 BUSINESS ACCOUNTING & FINANCE Furniture and fittings 640 Motor vehicles 6,250 Buildings 7,500 Capital 12,500 Bad debts 125 Provision for bad debts 200 Sundry debtors and creditors 3,800 2,500 Stock 3.460 Purchases and sales 5.475 15.450 Bank overdraft A 2,850 Sales and purchase returns 200 125 Advertising 450 Interest 118 Commission 375 Cash 650 Taxes and insurance 1,250 General expenses 782 Salaries 3,300 34,000 34,000 The following adjustments are to be made: Stock in hand on 31st December 2014 was Rs.3, 250. Depreciate buildings @ 5%, furniture and fittings @ 10% and motor vehicles @ 20%. . Rs.85 is due for interest on bank overdraft. Salaries Rs.300 and taxes Rs.120 are outstanding. Insurance amounting to Rs.100 is prepaid. One-third of the commission received is in respect of work to be done next year. Write off a further Rs.100 as bad debts Prepare a trading and profit and loss A/c for 2014 and a balance sheet as on that date the year ending 31st
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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