Nene Koba, is a sole trader with a small business. The trial balance extracted as at 30 June 2018 did not agree. The credits exceeded the debits by GH¢3,275 and the difference was entered in a suspense account. A detailed examination of the books was undertaken and the following matters were uncovered: • Purchases returns of GH¢19,350 has been credited to sales returns as GH¢11,175, and the corresponding entry was correctly entered. • An addition error was discovered in the sales returns day book and as a result, the posting to the ledger was understated by GH¢1,600. • An amount of GH¢245 cash received from a customer was debited to the customer's account and credited to the cash account. • The cash at hand balance of GH¢5,350 as at 30 June 2018 was omitted from the trial balance in error. • Building repairs of GH¢4,300 were undertaken during the month ended 30 June 2018, the amount was paid by cheque. The entry was correctly treated in the bank account but GH¢1,800 was credited to building. On 1 January 2017, rent for the year ended 31 December 2017 of GH¢ 22,500 was paid and accounted for correctly. Nene Koba's landlord has indicated that rent for 2018 will increase to GH¢ 30,000 but no invoice has been received. Nene Koba however, has not paid any rent for 2018 and has made no accounting entry for it because he has not received an invoice from the landlord. • A credit sale of GH¢12,500 (excluding tax) was recorded by debiting sales with GH¢ 12,500 and crediting receivable with GH¢12,500. The rate of tax is 15%. Required: i Prepare journal entries with appropriate narrations necessary to correct the above errors.
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.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
