The following are the trial balance and the other information related to Bruce Marigold, who operates a construction hauling business. MARIGOLD TRIAL BALANCE DECEMBER 31, 2020 Debit Credit Cash $39,000 Accounts Receivable 48,400 Allowance for Doubtful Accounts $3,400 Supplies 3,040 Prepaid Insurance 1,200 Equipment 30,000 Accumulated Depreciation—Equipment 5,750 Notes Payable 7,200 Owner’s Capital 45,640 Service Revenue 97,790 Rent Expense 7,800 Salaries and Wages Expense 28,400 Utilities Expenses 1,040 Office Expense 900 $159,780 $159,780 1. Fees received in advance from clients $5,100, which were recorded as revenue. 2. Services performed for clients that were not recorded by December 31, $5,000. 3. Equipment is being depreciated at 8% per year. 4. Bad debt expense for the year is $1,470. 5. Insurance expired during the year $520. 6. Marigold gave the bank a 90-day, 5% note for $7,200 on December 1, 2020. 7. Rent of the building is $600 per month. The rent for 2020 has been paid, as has that for January 2021. 8. Office salaries and wages earned but unpaid December 31, 2020, $1,540. Marigold withdrew $15,000 cash for personal use during the year. (a) From the trial balance and other information given, prepare annual adjusting entries as of December 31, 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.
|
MARIGOLD
TRIAL BALANCE DECEMBER 31, 2020 |
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|---|---|---|---|---|---|---|
|
Debit
|
Credit
|
|||||
| Cash | $39,000 | |||||
| 48,400 | ||||||
| Allowance for Doubtful Accounts | $3,400 | |||||
| Supplies | 3,040 | |||||
| Prepaid Insurance | 1,200 | |||||
| Equipment | 30,000 | |||||
| Accumulated Depreciation—Equipment | 5,750 | |||||
| Notes Payable | 7,200 | |||||
| Owner’s Capital | 45,640 | |||||
| Service Revenue | 97,790 | |||||
| Rent Expense | 7,800 | |||||
| Salaries and Wages Expense | 28,400 | |||||
| Utilities Expenses | 1,040 | |||||
| Office Expense | 900 | |||||
|
$159,780
|
$159,780
|
| 1. | Fees received in advance from clients $5,100, which were recorded as revenue. | |
| 2. | Services performed for clients that were not recorded by December 31, $5,000. | |
| 3. | Equipment is being depreciated at 8% per year. | |
| 4. | ||
| 5. | Insurance expired during the year $520. | |
| 6. | Marigold gave the bank a 90-day, 5% note for $7,200 on December 1, 2020. | |
| 7. | Rent of the building is $600 per month. The rent for 2020 has been paid, as has that for January 2021. | |
| 8. | Office salaries and wages earned but unpaid December 31, 2020, $1,540. |
Marigold withdrew $15,000 cash for personal use during the year.
(a)
Journal entries refer to the recording of transactions in an appropriate way. With the help of journal entry, the management can sort all the transactions according to the related account. Basically, it is a sum of debit and credit.
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