he new office space. The supplies cost $975 and were paid for in cash. May 4 – Hazel purchased an advertisement in the local newspaper which also ran online. The ad cost $350 and was purchased on account. May 5 – Hazel purchased a new computer for the off
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.
Create a chart of accounts for this business.
May 1 – Hazel invested $50,000 of her own money in the business in exchange for common stock.
May 1 – Hazel rented an office space for her business and paid $6,000 in advance for 6 months of rent.
May 3 – Hazel purchased office supplies to use in the new office space. The supplies cost $975 and were paid for in cash.
May 4 – Hazel purchased an advertisement in the local newspaper which also ran online. The ad cost $350 and was purchased on account.
May 5 – Hazel purchased a new computer for the office. The computer cost $2,400 and was purchased on account.
May 7 – Hazel received $1,000 in advance for services to be completed by the end of the month.
May 12 – Hazel received $500 from a client for services provided.
May 15 – Hazel hired an assistant to help her part time in the office. Hazel paid the assistant $850 for 2 weeks of wages.
May 16 – Hazel received $2,600 for services provided to clients.
May 17 – Hazel paid all the open accounts payable balances (for advertisement and computer).
May 20 – Hazel purchased office supplies on account for $714.
May 27 – Hazel received and paid the utility bill for May in the amount of $293.
May 28 – Hazel received and paid the internet and phone bill for May in the amount of $187.
May 29 – Hazel completed the work for the client who had paid in advance on May 7.
May 31 – Hazel received $2,500 for services provided to clients for the second half of May.
May 31 – Accruals that need entries for the month of May:
- The assistant is owed $620 for hours worked during the second half of May.
- Depreciation of $100 needs to be recorded for the month of May.
- Unbilled services for the month of May total $4,180.
- One month of prepaid rent expired.
- Supplies on hand at the end of the month total $1,165.
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