Michael Rau founded Michael's Fishing Supplies on 1 July 2019. The adjusted trial balance at 30 June 2020 (the end of the financial year) is shown below. Michael's Fishing Supplies Adjusted trial balance as at 30 June 2020 Account Debit Credit Cash at bank $15,130 Accounts receivable 30,740 GST receivable 2,640 Fishing supplies 7,320 Prepaid insurance 3,660 Boat 43,920 Accumulated depreciation — boat $21,960 Accounts payable 7,320 Salaries payable 2,490 Interest payable 3,810 Mortgage payable 9,520 Unearned revenue 8,200 GST payable 4,390 Michael Rau, capital 21,960 Michael Rau, drawings 17,570 Sales 73,980 Salaries expense 17,130 Insurance expense 1,320 Interest expense 730 Depreciation expense 5,120 Fishing supplies expense 2,490 Rent expense 5,860 $153,630 $153,630 a. Prepare closing entries to be made on 30 June 2020
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.
Michael Rau founded Michael's Fishing Supplies on 1 July 2019. The adjusted
|
Michael's Fishing Supplies
Adjusted trial balance as at 30 June 2020 |
||||
| Account |
Debit
|
Credit
|
||
|
Cash at bank
|
$15,130
|
|
||
|
|
30,740
|
|
||
|
GST receivable
|
2,640
|
|
||
|
Fishing supplies
|
7,320
|
|
||
|
Prepaid insurance
|
3,660
|
|
||
|
Boat
|
43,920
|
|
||
|
Accumulated depreciation — boat
|
|
$21,960
|
||
|
Accounts payable
|
|
7,320
|
||
|
Salaries payable
|
|
2,490
|
||
|
Interest payable
|
|
3,810
|
||
|
Mortgage payable
|
|
9,520
|
||
|
Unearned revenue
|
|
8,200
|
||
|
GST payable
|
|
4,390
|
||
|
Michael Rau, capital
|
|
21,960
|
||
|
Michael Rau, drawings
|
17,570
|
|
||
|
Sales
|
|
73,980
|
||
|
Salaries expense
|
17,130
|
|
||
|
Insurance expense
|
1,320
|
|
||
|
Interest expense
|
730
|
|
||
|
Depreciation expense
|
5,120
|
|
||
|
Fishing supplies expense
|
2,490
|
|
||
|
Rent expense
|
5,860 | |||
| $153,630 | $153,630 |
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