Valet Cleaners, Inc., was formed by bachelor's degree students from Bear University on April 1, 2018. Those students had little accounting experience. They need your help. 1) On the attached spreadsheet, record the events below, where appropriate. If an event is not to be recorded, notate "No Entry". And, 2) Complete your records with financial statements: multi-step income, retained earnings, cash flow, and financial position (aka balance sheet) in classified form. Apr. 1 2 3 Valet issued 10,000 shares of common stock and received $15,000. Valet signed a property rental lease at $500 per month, payable at end of month. Valet purchased cleaning equipment priced at $8,000, paying $3,000 cash and financed the balance on a note payable with interest due in 5 years; interest accrues at 6% per year, recorded monthly. 4 Purchased $1,200 of cleaning supplies on an account with monthly payments. Paid $2,400 for 1-year's insurance coverage of liability and business interruption. 16 Paid $400 of the amount owed on cleaning supplies purchased on April 4. 5 27 28 Collected $2,300 for the first month's cleaning services to counter customers. Mailed bills to commercial customers for $3,200 of cleaning services on account. Paid $500 for property lease signed April 2. 29 30 Computed $200 of depreciation on cleaning equipment for April. 30 Received a "Thank You" card from the insurance company for the 1-year policy; only 11 months of coverage remain on the policy. Counted $300 of cleaning supplies which remained on hand at April 30. Received a statement reminding Valet that the note and interest are due to the equipment supplier in 59 months. 30 30 30 One owner reminded cohorts that Valet should avoid tax problems with the IRS. A reasonable estimate is that Valet incurred $1,000 of taxes in April, but no taxes will be paid until March 15, 2019. 30 Owners declared and had Valet pay an $800 dividend. 30 One undergraduate owner feared that the cleaning business might not be successful. He sold his 2,000 shares to an MBA student for $2,500.
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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