xercise 4-9 Preparing closing entries and a post-closing trial balance LO P2, P3 The following adjusted trial balance contains the accounts and year-end balances of Cruz Company as of December 31. No. Account Title Debit Credit 101 Cash $ 18,000 126 Supplies 9,600 128 Prepaid insurance 2,000 167 Equipment 23,000
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.
Exercise 4-9 Preparing closing entries and a post-closing trial balance LO P2, P3
The following adjusted trial balance contains the accounts and year-end balances of Cruz Company as of December 31.
| No. | Account Title | Debit | Credit | ||||
| 101 | Cash | $ | 18,000 | ||||
| 126 | Supplies | 9,600 | |||||
| 128 | Prepaid insurance | 2,000 | |||||
| 167 | Equipment | 23,000 | |||||
| 168 | $ | 6,500 | |||||
| 301 | A. Cruz, Capital | 41,257 | |||||
| 302 | A. Cruz, Withdrawals | 6,000 | |||||
| 404 | Services revenue | 46,700 | |||||
| 612 | Depreciation expense—Equipment | 2,000 | |||||
| 622 | Salaries expense | 27,226 | |||||
| 637 | Insurance expense | 1,961 | |||||
| 640 | Rent expense | 3,129 | |||||
| 652 | Supplies expense | 1,541 | |||||
| Totals | $ | 94,457 | $ | 94,457 | |||
1. Prepare the December 31, closing entries for Cruz Company. Assume the account number for Income Summary is 901.
2. Prepare the December 31, post-closing trial balance for Cruz Company. Note: A. Cruz, Capital was $41,257 on December 31 of the prior year.
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