Prepare adjusting entries as of December 31, 2021 for the following: DEFERRAL TYPE 1. A company paid on June 1, 2021 one-year rent for the ground floor of a building at P720,000. The amount was debited to Prepaid Rent. 2. A company issued on October 17, 2021 a 180-day 12% P48,000 note. Interest has been paid in advance and was debited to Prepaid Interest. 3. On January 1, 2021, a company’s Office Supplies account has a balance of P7,850. On June 1 of the current year, the company bought additional office supplies for P80,000 on terms 20% down and the balance to be paid within 30 days. Before full payment was made, the company returned defective office supplies amounting to P2,550. At the end of the year, office supplies still unused amount to P12,420. 4. A company received a 10-month 18% P120,000 note dated August 31, 2021. The company collected in advance the full interest due on the note. The amount was credited to Unearned Interest. 5. Unearned Rent for P284,400 was credited by a company on May 1, 2021 representing 18-month advance collection of rent from a tenant.
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.
Prepare
1. A company paid on June 1, 2021 one-year rent for the ground floor of a building at P720,000. The amount was debited to Prepaid Rent.
2. A company issued on October 17, 2021 a 180-day 12% P48,000 note. Interest has been paid in advance and was debited to Prepaid Interest.
3. On January 1, 2021, a company’s Office Supplies account has a balance of P7,850. On June 1 of the current year, the company bought additional office supplies for P80,000 on terms 20% down and the balance to be paid within 30 days. Before full payment was made, the company returned defective office supplies amounting to P2,550. At the end of the year, office supplies still unused amount to P12,420.
4. A company received a 10-month 18% P120,000 note dated August 31, 2021. The company collected in advance the full interest due on the note. The amount was credited to Unearned Interest.
5. Unearned Rent for P284,400 was credited by a company on May 1, 2021 representing 18-month advance collection of rent from a tenant.
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