What are adjusting entries and why are they necessary?

Q: What is the purpose of EDI?

A: Transparency in electronic data exchange: Expanding EDI enables suppliers to get access to a buyer's…

Q: When is nonfinancial information relevant?

A: Non-Financial information: Non- Financial decisions are qualitative in nature and do not include…

Q: What does the blank section post mean or what goes there

A: Post Column : It is the Column through which book keeper identify whether journal entries are…

Q: answers be itemized

A: There are situations when a company computes that if there is a change in the depreciation method…

Q: What is meant by Authorized and issued captial?

A: Meaning of Authorised capital  stock:Authorised stock refers to the maxinum number of preferred…

Q: What is the meaning behind Recognition Criteria? How does it help determine when an event should be…

A: Accounting ideas, usually referred to as accounting assumptions or accounting principles, are the…

Q: Why is it important to read the Misc Notes section?

A: Notes to financial statements are additional information and explanations provided in a company's…

Q: What is a MIS report, why is it  prepared?

A: MIS is Management Information System. Management information system is an integrated collection of…

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.