ABM Co. is a merchandising business, registered as a sole proprietorship. The account balances of ABM Co. as of June 1, 2021 are as follows: 001 Cash P 35,750.00 002 Accounts receivable 15,000.00 003 Merchandise inventory 050 Accounts payable 060 Maharlika, Capital 15,000.00 20,000.00 30,000.00 100 Sales 30,000.00 101 Sales returns and allowances 102 Sales discounts 5,000.00 2,000.00 200 Cost of merchandise sold 5,000.00 301 Advertising expense 302 Utilities expense 1,500.00 750.00 303 Salaries expense 304 Transportation expense 400 Income summary During June, the following transactions were completed: June 1 Ms. Maharlika, the business owner, invested cash in the business, P100,000. Bought merchandise on account from XYZ Co., P55,000, terms 2/10, n/30, FOB Shipping Point. Paid freight, P2,000o. 10 Sold merchandise on account to LMN Co., P22,000, terms 2/10, n/30, FOB Destination. Paid transportation expense, P500. The cost of merchandise sold was P20,000. 15 Paid cash for purchase made on June 5, less discount. 20 Received merchandise returned on sale of June 10, P2,200. The cost of merchandise returned was P2,000. 20 Received cash payment from LMN Co., in payment of account, less return and discount. 30 Paid the following: Advertising, P1,500; Utilities, P750; Salaries, P10,000. From the obove transactions, complete the accounting cycle of ABM Co. for the month of June 2021. a) Prepare the journal entries in the General Journol and post the entries to the General Ledger. b) Prepare the Statement of Comprehensive Income. c) Prepare the closing entries to the General Journal. Post the entries to the General Ledger and close the nominal accounts. d) Prepare the Statement of Financial Position.
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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