The trial balance for Finders Company does not balance and the information as follows has been presented: Finders Company Trial Balance February 29, 2020 Account Debit Credit Cash 6,300 Accounts receivable 6,000 Supplies 400 Equipment 22,300 Computers 49,000 Accounts payable 2,800 Notes payable 18,500 Wright, Capital 50,000 Wright, Drawing 4,000 Service revenue 4,100 Salary Expense 1,400 Rent expense 800 Advertising expense 900 Utilities expense 800 Total 91,900 75,400 The following errors were detected: The cash balance is overstated by $5,000. Rent expense of $340 was erroneously posted as a credit rather than a debit. A $6,800 credit to Service revenue was not posted. A $400 debit to Accounts receivable was posted as $40. The balance of Utilities expense is understated by $70. A $900 purchase of supplies on account was neither journalized nor posted. Equipment should be $16,490. Requirement Prepare the corrected trial balance on February 29, 2020. Journal entries are not required. Prepare the company's financial statements for the month of February 2020.
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
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Finders Company |
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|
Trial Balance |
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February 29, 2020 |
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|
Account |
Debit |
Credit |
|
Cash |
6,300 |
|
|
|
6,000 |
|
|
Supplies |
400 |
|
|
Equipment |
22,300 |
|
|
Computers |
49,000 |
|
|
Accounts payable |
|
2,800 |
|
Notes payable |
|
18,500 |
|
Wright, Capital |
|
50,000 |
|
Wright, Drawing |
4,000 |
|
|
Service revenue |
|
4,100 |
|
Salary Expense |
1,400 |
|
|
Rent expense |
800 |
|
|
Advertising expense |
900 |
|
|
Utilities expense |
800 |
|
|
Total |
91,900 |
75,400 |
The following errors were detected:
- The cash balance is overstated by $5,000.
- Rent expense of $340 was erroneously posted as a credit rather than a debit.
- A $6,800 credit to Service revenue was not posted.
- A $400 debit to Accounts receivable was posted as $40.
- The balance of Utilities expense is understated by $70.
- A $900 purchase of supplies on account was neither journalized nor posted.
- Equipment should be $16,490.
Requirement
- Prepare the corrected trial balance on February 29, 2020.
Journal entries are not required. - Prepare the company's financial statements for the month of February 2020.
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