A Company reported the following balances on its unadjusted trial balance as of December 31, 2021: Assets P130,000 Liabilities 35,000 Equity 50,000 Revenues 140,000 Expenses 95,000 The following adjustments were noted: a. Office supplies ending balance, P15,000. The office supplies account had a balance of P6,000 on January 1, 2021. Office supplies purchased for the year amounts to P25,000 which was debited to a permanent account. b. Total premium paid on September 1, 2021 was P36,000 for a three-year fire
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.
A Company reported the following balances on its unadjusted
December 31, 2021:
Assets P130,000
Liabilities 35,000
Equity 50,000
Revenues 140,000
Expenses 95,000
The following adjustments were noted:
a. Office supplies ending balance, P15,000. The office supplies account had a
balance of P6,000 on January 1, 2021. Office supplies purchased for the year
amounts to P25,000 which was debited to a permanent account.
b. Total premium paid on September 1, 2021 was P36,000 for a three-year fire
insurance policy. This was initially recorded as expense.
c. Depreciation of office equipment purchased on June 1, 2021 with a cost of
110,000, useful life of 5 years based on
value of P10,000.
d. Rent income received from tenant on November 1, 2021 representing four
months’ rent amounted to P20,000. This was recorded as a credit to a real
account.
e. The Company issued a note for P180,000 for its September 1 purchase of
merchandise. The note is dated on the same date, matures in 8 months and
bears 10% interest.
f. An allowance for doubtful accounts of 3% of the accounts receivable is to be
established. Accounts receivable amounted to P50,000.
**Determine total amount of (1) net income (2) assets (3) liabilities and (4) equity
on December 31, 2021.
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