Selected account balances before adjustment for Atlantic Coast Realty at July 31, the end of the current year, are as follows: Debits Credits Accounts Receivable $ 75,000 Equipment 345,700 Accumulated Depreciation—Equipment $112,500 Prepaid Rent 9,000 Supplies 3,350 Wages Payable – Unearned Fees 12,000 Fees Earned 660,000 Wages Expense 325,000 Rent Expense – Depreciation Expense – Supplies Expense – Data needed for year-end adjustments are as follows: • Unbilled fees at July 31, $11,150. • Supplies on hand at July 31, $900. • Rent expired, $6,000. • Depreciation of equipment during year, $8,950. • Unearned fees at July 31, $2,000. • Wages accrued but not paid at July 31, $4,840. Required: 1. Journalize the six adjusting entries required at July 31, based on the data presented. Refer to the Chart of Accounts for exact wording of account titles. 2. What would be the effect on the income statement if the adjustments for unbilled fees and accrued wages were omitted at the end of the year? 3. What would be the effect on the balance sheet if the adjustments for unbilled fees and accrued wages were omitted at the end of the year? 4. What would be the effect on the “Net increase or decrease in cash” on the statement of cash flows if the adjustments for unbilled fees and accrued wages were omitted at the end of the year?
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.
|
|
Debits
|
Credits
|
| Accounts Receivable | $ 75,000 | |
| Equipment | 345,700 | |
| $112,500 | ||
| Prepaid Rent | 9,000 | |
| Supplies | 3,350 | |
| Wages Payable | – | |
| Unearned Fees | 12,000 | |
| Fees Earned | 660,000 | |
| Wages Expense | 325,000 | |
| Rent Expense | – | |
| Depreciation Expense | – | |
| Supplies Expense | – |
| • | Unbilled fees at July 31, $11,150. |
| • | Supplies on hand at July 31, $900. |
| • | Rent expired, $6,000. |
| • | Depreciation of equipment during year, $8,950. |
| • | Unearned fees at July 31, $2,000. |
| • | Wages accrued but not paid at July 31, $4,840. |
| Required: | |
| 1. | Journalize the six |
| 2. | What would be the effect on the income statement if the adjustments for unbilled fees and accrued wages were omitted at the end of the year? |
| 3. | What would be the effect on the balance sheet if the adjustments for unbilled fees and accrued wages were omitted at the end of the year? |
| 4. | What would be the effect on the “Net increase or decrease in cash” on the statement of cash flows if the adjustments for unbilled fees and accrued wages were omitted at the end of the year? |
CHART OF ACCOUNTSAlantic Coast RealtyGeneral Ledger
| ASSETS | |
| 11 | Cash |
| 12 | Accounts Receivable |
| 13 | Supplies |
| 14 | Prepaid Rent |
| 15 | Land |
| 16 | Equipment |
| 17 | Accumulated Depreciation-Equipment |
| LIABILITIES | |
| 21 | Accounts Payable |
| 22 | Unearned Fees |
| 23 | Wages Payable |
| 24 | Taxes Payable |
| EQUITY | |
| 31 | Owner’s Equity |
| 32 | Withdrawals |
| REVENUE | |
| 41 | Fees Earned |
| 42 | Rent Revenue |
| EXPENSES | |
| 51 | Advertising Expense |
| 52 | Insurance Expense |
| 53 | Rent Expense |
| 54 | Wages Expense |
| 55 | Supplies Expense |
| 56 | Utilities Expense |
| 57 | Depreciation Expense |
| 59 | Miscellaneous Expense |
Journal entries are prepared to record the financial and non financial transaction of the business and it has two sides debit and credit which should be always equal.
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