Willow Window Washing Services prepares adjustments monthly and shows the following selected accounts on its December 31, 2023, unadjusted trial balance: Account Debit Credit Prepaid insurance $ 3,780 Prepaid office rent 24,000 Prepaid subscriptions 1,320 Prepaid equipment rental 26,880 Required: Prepare the required monthly adjusting entries at December 31, 2023, based on the following additional information: The remaining balance in Prepaid Insurance was for a six-month insurance policy purchased for $7,560 and in effect on September 1, 2023. $5,400 of the balance in Prepaid Office Rent had not been used as at December 31, 2023. $1,160 of the balance in Prepaid Subscriptions had been used as at December 31, 2023. The company paid $34,560 on April 1, 2023, to rent equipment for a three-year period beginning April 1, 2023. Date General Journal Debit Credit Dec 31, 2023 Analysis Component: If the above adjustments were not recorded, identify the types of accounts that would be affected and if they would be over- or understated. Asset Equity Expenses Profit
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.
Willow Window Washing Services prepares adjustments monthly and shows the following selected accounts on its December 31, 2023, unadjusted
| Account | Debit | Credit | ||
| Prepaid insurance | $ | 3,780 | ||
| Prepaid office rent | 24,000 | |||
| Prepaid subscriptions | 1,320 | |||
| Prepaid equipment rental | 26,880 | |||
Required:
Prepare the required monthly
- The remaining balance in Prepaid Insurance was for a six-month insurance policy purchased for $7,560 and in effect on September 1, 2023.
- $5,400 of the balance in Prepaid Office Rent had not been used as at December 31, 2023.
- $1,160 of the balance in Prepaid Subscriptions had been used as at December 31, 2023.
- The company paid $34,560 on April 1, 2023, to rent equipment for a three-year period beginning April 1, 2023.
Analysis Component:Date General Journal Debit Credit Dec 31, 2023
If the above adjustments were not recorded, identify the types of accounts that would be affected and if they would be over- or understated.
AssetEquity - Expenses
- Profit
Step by step
Solved in 2 steps with 2 images
