Significance of Journal Entries and Trial Balance in Business Accounting

Running head: BUSINESS ACCOUNTING
Business accounting
Name of the student
Name of the university
Author note

1BUSINESS ACCOUNTING
Table of Contents
Introduction................................................................................................................................2
Step 2 – Journal entries for adjustment entries..........................................................................3
Step 3 – Worksheet completion.................................................................................................4
Step 4 – Income statement prepared from adjusted worksheet..................................................5
Step 5 – Journal entries for closing entries................................................................................6
Step 6 – Changes in equity.........................................................................................................6
Step 7..........................................................................................................................................8
1. Trial balance and purpose of its creation........................................................................8
2. Adjusting journal entries and purpose of recording it.....................................................9
3. Purpose of preparing the adjusted trial balance............................................................10
4. Difference between closing journal entries and adjusting journal entries....................11
Conclusion................................................................................................................................12
Reference..................................................................................................................................13

2BUSINESS ACCOUNTING
Introduction
Aim of the report is to concentrate on the significance of journal entries and
preparation of trial balance for preparing the income statement as well as the balance sheet.
This report will present journal entries with regard to the given adjusting entries and from the
adjusted trial balance it will prepare the profit and loss statement and balance sheet for the
concerned period. Trial balance is the preparation of account that represents balances from
the entire general ledger with regard to the transactions taken place during the concerned
period. Under the trial balance, total debit amount must be equal to total credit amount.
Adjusting journal entries on the other hand, are used as the tool for correction of errors and
these shall be completed before preparing the final financial statements for the year (Edwards
2013).
Step 2 – Journal entries for adjustment entries
In the books of Paul services journal entries for the period ended 30th June 2016
Date Particulars
Acc
No. Debit Credit
30th June
2016
Interest Expense 201
$
12,800.00
Interest Payable 201
$
12,800.00
(Interest accrued on mortgage)
Supplies Expense 201
$
960.00
Supplies 115
$
960.00
(using supplies for the period)
Insurance Expense 201
$
2,048.00
Prepaid Insurance 120
$
2,048.00
(To record prepaid amortisation)
Depreciation Expense - Furniture ((32000-2000)/5) 201 $

3BUSINESS ACCOUNTING
6,000.00
Accmulated Depreciation. - Furniture 137
$
6,000.00
(depreciation expense transferred to accumulated
depreciation)
Depreciation Expense - Office Equipment ((64000-4000)/5) 201
$
12,000.00
Acc. Depreciation - Office Equipment 141
$
12,000.00
(depreciation expense transferred to accumulated
depreciation)
Depreciation Expense - Store Equipment ((96000-6000)/10) 201
$
9,000.00
Acc. Depreciation - Store Equipment 146
$
9,000.00
(depreciation expense transferred to accumulated
depreciation)
Depreciation Expense - Automobile ((128000-8000)/10) 201
$
12,000.00
Acc. Depreciation - Automobile 171
$
12,000.00
(depreciation expense transferred to accumulated
depreciation)
Unearned revenue 201
$
8,000.00
Revenue 201
$
8,000.00
(Unearned revenue earned)