Transaction Analysis and Adjustments For each of the following unrelated situations, determine the financial statement effect using the Transaction Analysis Template: a. Equipment purchased at the beginning of the month for $33,600 on account has an estimated useful life of 4 years. One-month's depreciation on the equipment is unrecorded. b. An estimated utilities expense of $1,330 has been incurred in the current month, but the utility bill has not been received. c. On the first day of the current month, payment was made for four months rent in advance in the amount of $33,600. Monthly statements are now being prepared. d. Taylor Medical Equipment provides medical equipment for rent. A local nursing home pays $23,520 in advance for three-months rental rental of hospital beds. At the end of the current period, one month has passed. Note: Use negative signs with answers, when appropriate. Transaction a. To record depreciation. b. To record utilities. c. To record rent. d. To record revenue. Assets Balance Sheet Stockholders' = Liabilities + Equity Revenues Income Statement - Expenses = Net Income
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.
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