Hart, Attorney at Law, experienced the following transactions In Year 1, the first year of operations: 1. Accepted $18,900 on April 1, Year 1, as a retainer for services to be performed evenly over the next 12 months. 2. Performed legal services for cash of $63,500, 3. Purchased $1,100 of office supplies on account. 4. Paid $990 of the amount due on accounts payable. 5. Paid a cash dividend to the stockholders of $4,200. 6. Paid cash for operating expenses of $21,800. 7. Determined that at the end of the accounting period $130 of office supplies remained on hand. 8. On December 31, Year 1, recognized the revenue that had been earned for services performed in accordance with Transaction 1. Required: Show the effects of the events on the financial statements using a horizontal statements model. The first event has been recorded as an example. Note: In the Statement of Cash Flows column, use the initials OA to designate operating activity, IA for investing activity, FA for financing activity, and NC for net change in cash. Do not round intermediate calculations. Enter any decreases to account balances and cash outflows with a minus sign. Not all cells require input. Transaction 1. 2. 3. 4. 5. 6. 7. 8. Cash Assets 18,900+ Supplies a - HART, ATTORNEY AT LAW Effect of Transactions on the Financial Statements for Year 1 Balance Sheet Liabilities Accounts Payable Unearned Revenue 18,900 + A Stockholders' Equity Retained Earnings Revenue Income Statement Expense Net Income Statement of Cash Flows 18,900 OA
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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