The following trial balance has been extracted from the ledger of Mr. Cole, a sole trader: Trial balance as at 31 December, 2020 Particulars Debit ¢ Credit ¢ Sales 138,000 Purchases 82,350 Travel expenses 5,200 Drawings 7,800 Rent, rates & insurance 6,600 Postage and stationery 3,000 Advertisement 1,330 Salaries and wages 26,420 Bad debt 8,700 Investment Income 15,890 Debtors 12,120 Creditors 130 Cash in hand 1,700 Cash at bank 1,000 Inventory as at 1 January, 2020 11,800 Equipment at cost 58,000 Loan 19,000 Capital 53,000 226,020 226,020 Inventory at the close of business has been valued at ¢13,500 Required; Prepare an income statement for the year ending 31st December 2020 and a balance sheet as at that date.
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.
The following
Trial balance as at 31 December, 2020
Particulars Debit ¢ Credit ¢
Sales 138,000
Purchases 82,350
Travel expenses 5,200
Drawings 7,800
Rent, rates & insurance 6,600
Postage and stationery 3,000
Advertisement 1,330
Salaries and wages 26,420
Investment Income 15,890
Debtors 12,120
Creditors 130
Cash in hand 1,700
Cash at bank 1,000
Inventory as at 1 January, 2020 11,800
Equipment at cost 58,000
Loan 19,000
Capital 53,000
226,020 226,020
Inventory at the close of business has been valued at ¢13,500
Required;
Prepare an income statement for the year ending 31st December 2020 and a
that date.
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