The accounts below were taken from the unadjusted trial balance of a company as at December 31, 2021: Accounts receivable 200,000 Sinking fund assets 20,000 Allowance for doubtful accounts 50,000 Cash in bank 894,000 Investment in shares, at cost 56,000 Interest payable 15,000 Notes receivable 100,000 Mortgage payable 1,200,000 Investment in associate 35,000 Merchandise inventory 123,000 Accounts payable 110,000 Notes payable 400,000 Employee’s withholding taxes payable 15,000 Bonds payable 500,000 Sales commissions payable 10,000 Share dividends payable 18,000 Additional information: a. Included in the accounts receivable is P60,000 due from a customer with special terms requiring the customer to pay in an equal semi-annual installment of P10,000 every end of June and December. In addition, accounts receivable was net of customers’ deposit of P5,000. b. Cash in bank includes P10,000 compensating balance legally restricted for short-term borrowing. In addition, a bank overdraft of P15,000 maintained in the same bank was deducted from the cash balance. c. Inventory includes P23,000 cost of goods in transit purchased FOB destination on December 27, 2021. The goods were received January 10, 2022 d. Sales commissions payable represent the net (offset) amount of advances on salespersons’ commissions amounting to P100,000 and sales commissions payable amounting to P110,000. e. The notes payable was issued on June 1, 2018, payable in 5 annual installments of P200,000 beginning June 1, 2019. On January 15, 2022, the entire balance was refinanced by issuance of long-term obligation payable in a lumpsum. [Q4]: Determine the total amount of (11) current assets, (12) non-current assets, (13) current liabilities and (14) non-current liabilities on December 31, 2021.
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.
December 31, 2021:
Accounts receivable 200,000
Sinking fund assets 20,000
Allowance for doubtful accounts 50,000
Cash in bank 894,000
Investment in shares, at cost 56,000
Interest payable 15,000
Notes receivable 100,000
Mortgage payable 1,200,000
Investment in associate 35,000
Accounts payable 110,000
Notes payable 400,000
Employee’s withholding taxes payable 15,000
Bonds payable 500,000
Sales commissions payable 10,000
Share dividends payable 18,000
Additional information:
a. Included in the accounts receivable is P60,000 due from a customer with special terms
requiring the customer to pay in an equal semi-annual installment of P10,000 every end
of June and December. In addition, accounts receivable was net of customers’ deposit
of P5,000.
b. Cash in bank includes P10,000 compensating balance legally restricted for short-term
borrowing. In addition, a bank overdraft of P15,000 maintained in the same bank was
deducted from the cash balance.
c. Inventory includes P23,000 cost of goods in transit purchased FOB destination on December
27, 2021. The goods were received January 10, 2022
d. Sales commissions payable represent the net (offset) amount of advances on salespersons’
commissions amounting to P100,000 and sales commissions payable amounting to P110,000.
e. The notes payable was issued on June 1, 2018, payable in 5 annual installments of
P200,000 beginning June 1, 2019. On January 15, 2022, the entire balance was refinanced
by issuance of long-term obligation payable in a lumpsum.
[Q4]: Determine the total amount of (11) current assets, (12) non-current assets, (13)
current liabilities and (14) non-current liabilities on December 31, 2021.
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