The following trial balance was extracted from the books of R Giggs at the close of business on 28 February 20X7. Dr Cr £ £ Purchases and sales 92,800 157,165 Cash at bank 4,100 Cash in hand 324 Capital account 1 March 20X6 11,400 Drawings 17,100 Office furniture 2,900 Rent 3,400 Wages and salaries 31,400 Discounts 820 160 Debtors and creditors 12,316 5,245 Stock 1 March 20X6 4,120 Provision for doubtful debts 1 March 20X6 405 Delivery van 3,750 Van running costs 615 Bad debts written off 730 174,375 174,375 Notes: (a) Stock 28 February 20X7 £2,400. (b) Wages and salaries accrued at 28 February 20X7 £340. (c) Rent prepaid at 28 February 20X7 £230. (d) Van running costs owing at 28 February 20X7 £72. (e) Increase the provision for doubtful debts by £91. (f ) Provide for depreciation as follows: Office furniture £380; Delivery van £1,250. Required to prepare: I. Income statement for the year ended 28 February 20X7 II Statement of financial position (Balance Sheet) as at 28 February 20X7
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
on 28 February 20X7.
Dr Cr
£ £
Purchases and sales 92,800 157,165
Cash at bank 4,100
Cash in hand 324
Capital account 1 March 20X6 11,400
Drawings 17,100
Office furniture 2,900
Rent 3,400
Wages and salaries 31,400
Discounts 820 160
Debtors and creditors 12,316 5,245
Stock 1 March 20X6 4,120
Provision for doubtful debts 1 March 20X6 405
Delivery van 3,750
Van running costs 615
174,375 174,375
Notes:
(a) Stock 28 February 20X7 £2,400.
(b) Wages and salaries accrued at 28 February 20X7 £340.
(c) Rent prepaid at 28 February 20X7 £230.
(d) Van running costs owing at 28 February 20X7 £72.
(e) Increase the provision for doubtful debts by £91.
(f ) Provide for
Required to prepare:
I. Income statement for the year ended 28 February 20X7
II
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