Business Accounting

This document provides information about business accounting, including trial balance, adjusting journal entries, income statement, and balance sheet. It explains the purpose of creating a trial balance, the reasons for recording adjusting entries, and the difference between adjustment entries and closing journal entries.

Running Head: BUSINESS ACCOUNTING 0
Business Accounting

BUSINESS ACCOUNTING 1
Table of Contents
Adjusting journal entries.......................................................................................................................2
Trial balance..........................................................................................................................................2
Income Statement..................................................................................................................................4
Balance Sheet........................................................................................................................................4
Statement of Changes in Equity.............................................................................................................5
Trial balance......................................................................................................................................5
Reason for Creation...........................................................................................................................6
Reason for recording.........................................................................................................................7
Purpose of writing an adjusted trial balance......................................................................................7
Difference between the adjustment entries and closing journal entries..............................................8
References.............................................................................................................................................9

BUSINESS ACCOUNTING 2
Adjusting journal entries
Journalise the adjusted transactions
Particulars Debit Credit
Interest Expense A/c Dr. 39920
To Interest Payable A/c 39920
(for interest accrued on the mortgage but not paid)
Supplies Expense A/c Dr. 997.5
To Supplies A/c 997.5
(for ending supplies in hand recorded)
Insurance expense A/c Dr. 2980
To Prepaid 2980
(for reversal of prepaid insurance)
Prepaid Insurance 7980
To Insurance Expense 7980
(for adjustment entry passed)
Insurance Dr. 1596
To Cash 1596
(for amount paid )
Depreciation Expense- Furniture 18000
Depreciation Expense- office Equipment 38000
Depreciation Expense- Store Equipment 29000
Depreciation Expense- Automobile 39000
To Accumulated Depreciation 124000
(for depreciation adjusted )
Cash A/c Dr. 24950
To unearned Revenue 24950
Unearned Revenue Dr. 24950
To Revenue 24950
Trial balance
Paul services Trial Balance As At

BUSINESS ACCOUNTING 3
30 June 2016
Account
No Account Name Debit Credit Adjustments
Final
Trial
Debit Credit Debit Credit
101 Cash at Bank
299000.
00 24950 1596
322354.
00
105 Accounts Receivable
99670.0
0
99670.0
0 0.00
115 Supplies 3990.00 997.5 2992.50
120 Prepaid Insurance 7980.00 7980 2980
12980.0
0
135 Office Furniture
99800.0
0
99800.0
0 0.00
137 Acc. Depreciation. - Furniture 0.00 18000 0.00
18000.0
0
140 Office Equipment
199600.
00
199600.
00 0.00
141 Acc. Depreciation - Equipment 0.00 38000 0.00
38000.0
0
145 Store Equipment
299400.
00
299400.
00 0.00
146 Acc. Depreciation - Equipment 0.00 29000 0.00
29000.0
0
170 Automobile
399200.
00
399200.
00 0.00
171 Acc. Depreciation - Automobile 0.00 39000
39000.0
0
201 Accounts Payable
199340.
00
199340.
00
201 Interest Payable
299010.
00 39920
338930.
00
201 Unearned revenue
49900.0
0 24950 24950
49900.0
0
201 Loan Payable
19960.0
0
19960.0
0
201 Mortgage Payable
399200.
00
399200.
00
201 Paul's Capital
81559.0
0
81559.0
0
201 Paul's Drawings 399.00 399.00
201 Revenue
399000.
00 24950
423950.
00
201 Advertising Expense 6000.00 6000.00
201 Automobile Expense 5775.00 5775.00
201
Depreciation Expense -
Furniture 0.00 18000
18000.0
0
201
Depreciation Expense -
Equipment 0.00 38000
38000.0
0
201
Depreciation Expense -
Store Equipment 0.00 29000
29000.0
0

BUSINESS ACCOUNTING 4
201
Depreciation Expense -
Automobile 0.00 39000
39000.0
0
201 Insurance Expense 5000.00 4576 7980 1596.00
201 Maintenance Expense
21000.0
0
21000.0
0
201 Miscellaneous Expense 1155.00 1155.00
201 Rent Expense 0.00 0.00
201 Supplies Expense 0.00 997.5 997.50
201 Utilities Expense 0.00 0.00
201 Interest Expense 0.00 39920
39920.0
0
144796
9.00
144796
9.00
227373
.50
227373
.50
163683
9.00
163683
9.00
Income Statement
Income Statement
Particulars Amount
Revenue 423950.00
Expenses
Advertising Expense 6000.00
Automobile Expense 5775.00
Depreciation Expense - Furniture 18000.00
Depreciation Expense - Equipment 38000.00
Depreciation Expense - Store Equipment 29000.00
Depreciation Expense - Automobile 39000.00
Insurance Expense 1596.00
Maintenance Expense 21000.00
Miscellaneous Expense 1155.00
Rent Expense 0.00
Supplies Expense 997.50
Utilities Expense 0.00
Interest Expense 39920.00
Profit/ loss 223506.50
Balance Sheet
Balance Sheet
Particulars Amount

BUSINESS ACCOUNTING 5
Paul's Capital 81559.00
Paul's Drawings 399.00
Add: Net Profits 223506.50
Total Capital 304666.50
Interest Payable 338930.00
Unearned revenue 49900.00
Loan Payable 19960.00
Accounts Payable 199340.00
Mortgage Payable 399200.00
Total 1311996.50
Cash at Bank 322354.00
Accounts Receivable 99670.00
Supplies 2992.50
Prepaid Insurance 12980.00
Office Furniture 99800.00
Office Equipment 199600.00
Store Equipment 299400.00
Automobile 399200.00
Less: accumulated Depreciation 124000.00 874000.00
Total 1311996.50
Statement of Changes in Equity
Statement of Changes in Equity 2016
Opening balance $ 81,559.00
Less: Drawings $ 399.00
Add: Net Profit $ 2,23,506.50
Closing capital $ 3,04,666.50
Trial balance
Trial balance is one of the basic process which is obtained by each and every organization
regularly. Without the appropriate trial balance it becomes impossible for the company to
prepare the financial statements such as the income statement and the balance sheet. Under

BUSINESS ACCOUNTING 6
the trial balance there are two columns namely the debit as well as the credit. The debit
column depicts all the assets and the expenses incurred, whereas the credit column shows the
amount of the revenue earned and the liabilities incurred in operating a business. The
magnificence of the trail balance lies in the arrangement between the debit and the credit side.
Toward the finish of the chronicle of the considerable number of exchanges from general
records the equalization is equivalent in both the sides. Prior in the manual framework the
preliminary equalization was set up by the bookkeeper or the clerk so as to discover the
fluctuations and the jumble of the sums, which currently has been unravelled through the
usage of the different software available in the market such as SAP, oracle , tally, for
example, Tally. Once the trial balance is established it certainly does not mean it will be free
from errors and there could be certain adjustments that are required to be adjusted while
preparing the final trial (Akçay, 2018).
Reason for Creation
The trial balance acts as the basic ingredient in determining the performance of the business,
henceforth the creation of the trail balance is equally necessary and worthy. At times the
situation can be such that the figure is posted into the wrong account, or the numbers are
reversed by mistake for example the adverting expense was originally $9876 but it has been
written as $9768. These mistakes were of such minor nature that they were being neglected
by the accountants. Hence the trial balance was introduced in the concept of the preparation
of the financial statements (Salmon and Wild, 2016).
Preliminary trial balance is a basic and important instrument which in the end distinguishes
such sort of blunders and the individual in charge of the mix-up can likewise be discovered
effectively in the association with the help of the trial balance. There is a considerable
rundown of the general population who uses the trial balance, for example, ,management
itself in preparation of the financial statements, the creditors in knowing whether the proper
recording of the entries are made in case of the inventory purchased on the credit, the
shareholder for making the strategic decision making. The preliminary trail balance has the
novel component that is serves the total prerequisite and gives an inside and out investigation
of the firm or the organization. The standard of the twofold passage framework can be made
sense of utilizing the preliminary parity.
Adjustment Journal Entry is passed utilizing the division of all the pay adjusts. The diary
section is fundamentally passed to cause an alteration of the incomes and the use from the

BUSINESS ACCOUNTING 7
beginning since them to have happened. These entries can likewise be named as a monetary
announcing that redresses the misstep which have made in the earlier years when the trial
balance was prepared. The Adjusting Journal Entries is utilized to adjust and make the offset
with the accumulation idea. The Adjusting Journal Entries is passed just before the
arrangement of the budget reports to move the sum into the fiscal summaries and mirror the
unmistakable and the straightforward picture. To deal with the proper accounting treatment
the altering of the entries is vital and a greater picture is reflected so as to take a gander at the
monetary changes of the firm (Accounitng Tools, 2018).
Reason for recording
Once the trial balance is prepared yet there are certain entries which the accountants fail to
record either intentionally to show the increased profit or unintentionally where the work load
is heavy. In both the scenarios the company must engage the accountant to pass the adjusting
journal entries to make the trial balance equal and worthy without any skip of even the
smallest transaction. That’s where the concept of the adjusting entries was introduced. The
adjusting entries are the way for the proper accounting treatment which organization must
follow and moreover the company have an advantage of the preparation of the trial balance
with the help of the recording of the adjusting entries. This can provide the advantage over
the competitors as they can have a rough idea by looking at their financial statements whether
the entries have been adjusted or not (Accounitng Tools, 2018).
Altering entries are recorded for the kind of the bookkeeping exchange, for example, to
record the devaluation and amortization of the period, to record a guarantee hold, when the
sales reserve account is made, or when any collected costs like prepaid insurance or rent or
advertising costs are recorded. Further, to address the month to month income figure the
adjusting entries play a crucial role in recording with the goal that the associations can get a
lucid image of their books of records. The best possible and the total learning of the adjusting
entries section help in knowing the eventual fate of the administrations. Accordingly these
journal entries help in picking the plans so business could get for the long haul advantage
(Blakely., 2018).
Purpose of writing an adjusted trial balance
The trial balance when have the certain entries to get adjust within a new trial balance is
prepared with the intention to correctly post all the transactions. This new trial balance is
known as the adjusted trail balance. The Adjusted trail balance can be prepared only after the

BUSINESS ACCOUNTING 8
adjusting entries are made. Further the verification of the debit as well as the credit side can
be done in the best possible manner with the help of the adjusted trial balance (Bailin and
Battersby, 2016).
Adjusted trial balance is portrayed toward the finish of the accounting cycle. Setting up a fair
fundamental preliminary equalization will help in structure up the budget reports for a
specific term and before setting up adjusted starter preliminary adjusts the yearly changes are
necessary. The other clarification behind setting up the decent fundamental Trial Balance is
for ensuring that adjustments to the transaction have been recorded successfully. As indicated
by the last stage through the summary of the reports of the organization execution is the
significant standpoint according to the banks, financial specialists, reviewers and investors. In
the event that there is any fluctuation in the financial reports than it won't be acknowledged
by the clients of the announcements and for the purpose of the decision making (Banks,
2016).
Difference between the adjustment entries and closing journal entries
Closing entries are the entries that are recorded to close the books of the accounts whereas the
adjusting entries are those entries that are recoded to rectify the balances that have not taken
into account for the particular year and which should have been taken. The only difference
between the both the entries is the time frame of the recording and the purpose of the
recording (Dekker, 2016).
In the event of the adjusting entries, it is recorded toward the finish of the budgetary year
however before the arrangement of the monetary reports and these records are kept up as a
proof with the end goal of the association itself. Additionally the exceptional fiscal reports
will be useful for the organization and the clients of the equivalent. For example the
recording of the prepaid insurance rent that has been accounted for the current year is
recorded successfully (Bah and Fang, 2016).
Closing entries are recorded on the last day of the financial year but before the financial
statements are presented to its users. Most of the times the reports include the closing entries
recording as these entries help in creating the zero variance between the revenue and the
expenses incurred by the organization. This can also be understood with the simple fact that
the after the profit or loss is made in the company, the company will start with the new
figures, leaving the old ones in the previous years. Also there will some account which will
be carried forward as well (Accounting capital, 2019).

BUSINESS ACCOUNTING 9
References
Accounitng Tools, 2018. Purpose of the trial balance [Online] Available from
https://www.accountingtools.com/articles/what-is-the-purpose-of-a-trial-balance.html
[Accessed on 31st may 2019]
Accounting capital, 2019. What are Closing Entries? [Online] Available from
https://www.accountingcapital.com/journal-entries/what-are-closing-entries/ [Accessed on
31st may 2019]
Akçay, S., 2018. A COMPARATIVE EVALUATION ON THE GENERAL ACCOUNTING
SYSTEMS OF TURKEY AND KAZAKHSTAN. CHANGING ORGANIZATIONS, p.87.
Bah, E.H. and Fang, L., 2016. Entry costs, financial frictions, and cross-country differences
in income and TFP. Macroeconomic Dynamics, 20(4), pp.884-908.
Bailin, S. and Battersby, M., 2016. Reason in the balance: An inquiry approach to critical
thinking. Hackett Publishing.
Banks, E., 2016. Dictionary of Finance, Investment and Banking. Springer.
Blakely., R. 2018. What Are Adjusting Entries? [Online] Available from
https://www.patriotsoftware.com/accounting/training/blog/adjusting-entries/ [Accessed on
31st may 2019]
Dekker, S., 2016. Just culture: Balancing safety and accountability. CRC Press.
Proformative, 2016. Trial Balance [Online] Available from
https://www.proformative.com/questions/adjusted-trial-balance [Accessed on 31st may 2019]
Salmon, J. and Wild, C., 2016. First Steps in SAP S/4HANA Finance.