Trial Balance of Deon Insurance Company Limited as at 31st December, 2019 Debit Credit Claims paid 8,834,289 Commissions paid 142,583 Interest paid 4,000,000 Staff cost 29,053,167 Audit fees 130,767 Other income- Interest on investment 2,666,667 Reinsurance claims recovered 2,466,667 Stated capital 15,533,335 Capital surplus 9,588,327 Income surplus 3,919,560 Contingency reserve 6,441,634 Building 12,916,647 Motor vehicle 5,332,255 Equipment and furniture 9,042,985 Acc. Dep: Building 2,287,357 Acc. Dep: Motor vehicle 3,364,404 Acc. Dep: Equipment and furniture 1,102,471 Gross premium 90,740,819 10% Debenture 70,000,000 Premium returned and cancelled 10,000,000 Reinsurance premium paid 27,603,132 Intangible assets 35,797,721 Investment properties 34,295,050 Receivables 12,121,312 Prepayment 10,705,063 Unexpired risk reserve 9,817,443 Cash and bank 23,005,933 Outstanding claims payable 5,052,220 222,980,904 222,980,904 Additional Information Audit fees accrued for the year ended 31st Dec 2019 was GHȼ1,520. The company pays interest on 10% debenture semi-annual. Unexpired reserve risk is calculated at 25% Assume corporate tax is 25% Depreciation is to be accounted for on the following basis: Buildings 5% Straight line method Motor vehicles 20% Reducing balance method Equipment and furniture 10% Straight line method In compliance with the Insurance Act (Act 724) 20% of net profit after tax is to be transferred to contingency reserve. Required: Prepare the following financial statements of Deon Insurance Limited for publication in accordance with relevant legislations: Prepare the Statement of Comprehensive Income for the year ended 31st December, 2019 Prepare the Statement of Changes in Equity for the ended 31st December, 2019 Prepare the Statement of Financial Position as at 31st December, 2019.
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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Debit |
Credit |
|
Claims paid |
8,834,289 |
|
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Commissions paid |
142,583 |
|
|
Interest paid |
4,000,000 |
|
|
Staff cost |
29,053,167 |
|
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Audit fees |
130,767 |
|
|
Other income- Interest on investment |
|
2,666,667 |
|
Reinsurance claims recovered |
|
2,466,667 |
|
Stated capital |
|
15,533,335 |
|
Capital surplus |
|
9,588,327 |
|
Income surplus |
|
3,919,560 |
|
Contingency reserve |
|
6,441,634 |
|
Building |
12,916,647 |
|
|
Motor vehicle |
5,332,255 |
|
|
Equipment and furniture |
9,042,985 |
|
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Acc. Dep: Building |
|
2,287,357 |
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Acc. Dep: Motor vehicle |
|
3,364,404 |
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Acc. Dep: Equipment and furniture |
|
1,102,471 |
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Gross premium |
|
90,740,819 |
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10% Debenture |
|
70,000,000 |
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Premium returned and cancelled |
10,000,000 |
|
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Reinsurance premium paid |
27,603,132 |
|
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Intangible assets |
35,797,721 |
|
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Investment properties |
34,295,050 |
|
|
Receivables |
12,121,312 |
|
|
Prepayment |
10,705,063 |
|
|
Unexpired risk reserve |
|
9,817,443 |
|
Cash and bank |
23,005,933 |
|
|
Outstanding claims payable |
|
5,052,220 |
|
|
222,980,904 |
222,980,904 |
Additional Information
- Audit fees accrued for the year ended 31st Dec 2019 was GHȼ1,520.
- The company pays interest on 10% debenture semi-annual.
- Unexpired reserve risk is calculated at 25%
- Assume corporate tax is 25%
Depreciation is to be accounted for on the following basis:
Buildings 5%
Motor vehicles 20%
Equipment and furniture 10% Straight line method
- In compliance with the Insurance Act (Act 724) 20% of net profit after tax is to be transferred to contingency reserve.
Required:
Prepare the following financial statements of Deon Insurance Limited for publication in accordance with relevant legislations:
- Prepare the Statement of Comprehensive Income for the year ended 31st December, 2019
- Prepare the Statement of Changes in Equity for the ended 31st December, 2019
- Prepare the
Statement of Financial Position as at 31st December, 2019.
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