The following trial balance was taken from the books of Venus Corporation at December 31, 2020: Account Debit Credit Cash........................................................................................................... $ 40,000 Accounts Receivable.................................................................................... 106,000 Prepaid Rent ............................................................................................... 12,800 Note Receivable................................................................................................ 8,000 Merchandise Inventory................................................................................... 54,000 Unexpired Insurance......................................................................................... 4,800 Furniture and Equipment.............................................................................. 138,000 Accumulated Depreciation........................................................................................ 15,000 Accounts Payable....................................................................................................... 12,600 Common Shares......................................................................................................... 44,000 Retained Earnings...................................................................................................... 65,000 Sales........................................................................................................................... 410,000 Cost of Goods Sold....................................................................................... 128,000 Salaries Expense............................................................................................. 53,000 Totals.................................................................................................. $ 546,600 $ 546,600 At year end, the following items have not yet been recorded. Insurance expired during the year, $ 3,000. Depreciation on furniture and equipment, 10% per year. Interest at 9% is receivable on the note for one full year. Prepaid rent used up during the year, $6,000. Accrued salaries at December 31, $ 6,200. Instructions a) Prepare in good form the necessary adjusting entries, adding any new accounts which you may need. Narratives (explanations) are not required for journal entries. Question 3 (continued) b) Prepare the necessary closing entries.
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
Account Debit Credit
Cash........................................................................................................... $ 40,000
Prepaid Rent ............................................................................................... 12,800
Note Receivable................................................................................................ 8,000
Merchandise Inventory................................................................................... 54,000
Unexpired Insurance......................................................................................... 4,800
Furniture and Equipment.............................................................................. 138,000
Accounts Payable....................................................................................................... 12,600
Common Shares......................................................................................................... 44,000
Sales........................................................................................................................... 410,000
Cost of Goods Sold....................................................................................... 128,000
Salaries Expense............................................................................................. 53,000
Totals.................................................................................................. $ 546,600 $ 546,600
At year end, the following items have not yet been recorded.
- Insurance expired during the year, $ 3,000.
- Depreciation on furniture and equipment, 10% per year.
- Interest at 9% is receivable on the note for one full year.
- Prepaid rent used up during the year, $6,000.
- Accrued salaries at December 31, $ 6,200.
Instructions
- a) Prepare in good form the necessary
adjusting entries , adding any new accounts which you may need. Narratives (explanations) are not required forjournal entries.
Question 3 (continued)
- b) Prepare the necessary closing entries.
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