The following Trial Balance relates to the affairs of AUGUSTINE for the year ended 31st December 2020. (All figures in thousands of shillings) Dr Cr Sh Sh Salaries and wages 4,800 Rent and rates 300 Sales 25,600 Purchases 16,700 Stock 1 January 2020 4,350 Insurance 150 Motor expenses 420 General expenses 280 Premises 25,000 Motor vehicles 2,000 Debtors 4,320 Creditors 3,140 Bank 840 Capital 33,320 Drawings 2,900 62,060 _______ 62,060 The following information was also provided at 31st December 2020: 1. Stock Sh 4,590 2. Rates prepaid Sh 40 3. General expenses owing Sh 30 4. Insurance prepaid Sh 40. 5. Ignore the depreciation of fixed assets REQUIRED (a) Prepare the income statement for year ended 31st Dec 2020. (b) Statement of Financial Position as at the same date.
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
|
|
Dr |
Cr |
|
|
Sh |
Sh |
|
Salaries and wages |
4,800 |
|
|
Rent and rates |
300 |
|
|
Sales |
|
25,600 |
|
Purchases |
16,700 |
|
|
Stock 1 January 2020 |
4,350 |
|
|
Insurance |
150 |
|
|
Motor expenses |
420 |
|
|
General expenses |
280 |
|
|
Premises |
25,000 |
|
|
Motor vehicles |
2,000 |
|
|
Debtors |
4,320 |
|
|
Creditors |
|
3,140 |
|
Bank |
840 |
|
|
Capital |
|
33,320 |
|
Drawings |
2,900 62,060 |
_______ 62,060 |
The following information was also provided at 31st December 2020:
1. Stock Sh 4,590
2. Rates prepaid Sh 40
3. General expenses owing Sh 30
4. Insurance prepaid Sh 40.
5. Ignore the
REQUIRED
(a) Prepare the income statement for year ended 31st Dec 2020.
(b)
Step by step
Solved in 3 steps
