The transactions completed by PS Music during June 20Y9 were described at the end of Chapter 1. The following transactions were completed during July, the second month of the business’s operations: Jul. 1 Peyton Smith made an additional investment in PS Music by depositing $5,000 in PS Music’s checking account. 1 Instead of continuing to share office space with a local real estate agency, Peyton decided to rent office space near a local music store. Paid rent for July, $1,750. 1 Paid a premium of $2,700 for a comprehensive insurance policy covering liability, theft, and fire. The policy covers a one-year period. 2 Received $1,000 cash from customers on account. 3 On behalf of PS Music, Peyton signed a contract with a local radio station, KXMD, to provide guest spots for the next three months. The contract requires PS Music to provide a guest disc jockey for 80 hours per month for a monthly fee of $3,600. Any additional hours beyond 80 will be billed to KXMD at $40 per hour. In accordance with the contract, Peyton received $7,200 from KXMD as an advance payment for the first two months. 3 Paid $250 to creditors on account. 4 Paid an attorney $900 for reviewing the July 3 contract with KXMD. (Record as Miscellaneous Expense.) 5 Purchased office equipment on account from Office Mart, $7,500. 8 Paid for a newspaper advertisement, $200. 11 Received $1,000 for serving as a disc jockey for a party. 13 Paid $700 to a local audio electronics store for rental of digital recording equipment. 14 Paid wages of $1,200 to receptionist and part-time assistant. Enter the following transactions on Page 2 of the two-column journal: Jul. 16 Received $2,000 for serving as a disc jockey for a wedding reception. 18 Purchased supplies on account, $850. 21 Paid $620 to Upload Music for use of its current music demos in making various music sets. 22 Paid $800 to a local radio station to advertise the services of PS Music twice daily for the remainder of July. 23 Served as disc jockey for a party for $2,500. Received $750, with the remainder due August 4, 20Y9. 27 Paid electric bill, $915. 28 Paid wages of $1,200 to receptionist and part-time assistant. 29 Paid miscellaneous expenses, $540. 30 Served as a disc jockey for a charity ball for $1,500. Received $500, with the remainder due on August 9, 20Y9. 31 Received $3,000 for serving as a disc jockey for a party. 31 Paid $1,400 royalties (music expense) to National Music Clearing for use of various artists’ music during July. 31 Withdrew $1,250 cash from PS Music for personal use. PS Music’s chart of accounts and the balance of accounts as of July 1, 20Y9 (all normal balances), are as follows: 11 Cash $3,920 12 Accounts Receivable 1,000 14 Supplies 170 15 Prepaid Insurance — 17 Office Equipment — 21 Accounts Payable 250 23 Unearned Revenue — 31 Peyton Smith, Capital 4,000 32 Peyton Smith, Drawing 500 41 Fees Earned 6,200 50 Wages Expense 400 51 Office Rent Expense 800 52 Equipment Rent Expense 675 53 Utilities Expense 300 54 Music Expense 1,590 55 Advertising Expense 500 56 Supplies Expense 180 59 Miscellaneous Expense 415 Required: 1. Use the data in Accounting Equation Grid panel (reproduced from Chapter 1 Continuing Problem) and enter the July 1, 20Y9, account balances in the appropriate balance column of a four-column account. Write Balance in the Item column, and select a check mark (√) in the Posting Reference column. (Hint: Verify the equality of the debit and credit balances in the ledger before proceeding with the next instruction.) 2. Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting journal entry explanations. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered. 3. Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting. Record DATE, POST. REF., a debit or credit and a debit or credit under BALANCE on every line. In CNOW, Item descriptions are used for balances. Enter Balance for ITEM when recording beginning balances. Leave ITEM blank when recording all other entries. In CNOW, Journal pages do not begin with “J”. For example journal page 10 POST. REF. is simply 10. Use a ✓ for beginning balances. If the ending balance is $0, at least one balance amount should be $0. 4. Prepare an unadjusted trial balance as of July 31, 20Y9.
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.
Jul. | 1 | Peyton Smith made an additional investment in PS Music by depositing $5,000 in PS Music’s checking account. |
1 | Instead of continuing to share office space with a local real estate agency, Peyton decided to rent office space near a local music store. Paid rent for July, $1,750. | |
1 | Paid a premium of $2,700 for a comprehensive insurance policy covering liability, theft, and fire. The policy covers a one-year period. | |
2 | Received $1,000 cash from customers on account. | |
3 | On behalf of PS Music, Peyton signed a contract with a local radio station, KXMD, to provide guest spots for the next three months. The contract requires PS Music to provide a guest disc jockey for 80 hours per month for a monthly fee of $3,600. Any additional hours beyond 80 will be billed to KXMD at $40 per hour. In accordance with the contract, Peyton received $7,200 from KXMD as an advance payment for the first two months. | |
3 | Paid $250 to creditors on account. | |
4 | Paid an attorney $900 for reviewing the July 3 contract with KXMD. (Record as Miscellaneous Expense.) | |
5 | Purchased office equipment on account from Office Mart, $7,500. | |
8 | Paid for a newspaper advertisement, $200. | |
11 | Received $1,000 for serving as a disc jockey for a party. | |
13 | Paid $700 to a local audio electronics store for rental of digital recording equipment. | |
14 | Paid wages of $1,200 to receptionist and part-time assistant. |
Jul. | 16 | Received $2,000 for serving as a disc jockey for a wedding reception. |
18 | Purchased supplies on account, $850. | |
21 | Paid $620 to Upload Music for use of its current music demos in making various music sets. | |
22 | Paid $800 to a local radio station to advertise the services of PS Music twice daily for the remainder of July. | |
23 | Served as disc jockey for a party for $2,500. Received $750, with the remainder due August 4, 20Y9. | |
27 | Paid electric bill, $915. | |
28 | Paid wages of $1,200 to receptionist and part-time assistant. | |
29 | Paid miscellaneous expenses, $540. | |
30 | Served as a disc jockey for a charity ball for $1,500. Received $500, with the remainder due on August 9, 20Y9. | |
31 | Received $3,000 for serving as a disc jockey for a party. | |
31 | Paid $1,400 royalties (music expense) to National Music Clearing for use of various artists’ music during July. | |
31 | Withdrew $1,250 cash from PS Music for personal use. |
11 | Cash | $3,920 |
12 | 1,000 | |
14 | Supplies | 170 |
15 | Prepaid Insurance | — |
17 | Office Equipment | — |
21 | Accounts Payable | 250 |
23 | Unearned Revenue | — |
31 | Peyton Smith, Capital | 4,000 |
32 | Peyton Smith, Drawing | 500 |
41 | Fees Earned | 6,200 |
50 | Wages Expense | 400 |
51 | Office Rent Expense | 800 |
52 | Equipment Rent Expense | 675 |
53 | Utilities Expense | 300 |
54 | Music Expense | 1,590 |
55 | Advertising Expense | 500 |
56 | Supplies Expense | 180 |
59 | Miscellaneous Expense | 415 |
Required: | |
1. | Use the data in |
2. | Analyze and journalize each transaction in a two-column journal beginning on Page 1, omitting |
3. | Post the journal to the ledger, extending the account balance to the appropriate balance column after each posting. Record DATE, POST. REF., a debit or credit and a debit or credit under BALANCE on every line. In CNOW, Item descriptions are used for balances. Enter Balance for ITEM when recording beginning balances. Leave ITEM blank when recording all other entries. In CNOW, Journal pages do not begin with “J”. For example journal page 10 POST. REF. is simply 10. Use a ✓ for beginning balances. If the ending balance is $0, at least one balance amount should be $0. |
4. | Prepare an unadjusted |
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