INTRODUCTION Accounting is the process of recording business transfection, analysing & interpretation and prepare all the information in presentable for which can be understood by others. Accounting will be done by individual, small or large organization and other firms(Aidis, Estrin and Mickiewicz, 2012). Purpose of this accounting is to provide accurate or actual information which further provide the business information regarding their actual financial position of the company. This report include the various topics such as journal, ledger posting, trial balance, profit & loss account and balance sheet. Along with this, it include the various adjustment entries which provide efficiency in order to provide correct financial position. 1. Journal Entry of Adjusted Transaction Journalising Adjustment Entries ParticularsDebit SideCredit SideDebit ($)Credit ($) Interest AccDr.19120 To Interest Payable AccCr.19120 Supplies Expense Accounts Dr.Dr.1432.5 To Supplies AccountsCr.1432.5 Prepaid Insurance AccountsDr.764 To Cash AccountsCr.764 Insurance AccountsDr.764 To Prepaid Insurance AccountsCr.764 1
Depreciation AccountsDr.8000 To Office Furniture AccountsCr.8000 Depreciation AccountsDr.18000 To Office Equipment A/cCr.18000 Depreciation A/CDr.28000 To Store Equipment AccountsCr.28000 Depreciation A/CDr.38000 To Auto-mobile AccCr.38000 Unearned Revenue AccDr.11950 To Revenue AccCr.11950 2. Post Journal entries Trial Balance As At 30th June 2016 Account No.ParticularsDrCr 101Cash at Bank91390.00 105Accounts Receivable30460.00 115Supplies1910.00 120Prepaid Insurance3820.00 135Office Furniture47800.00 137Acc. Depreciation. - Furniture8000.00 140Office Equipment95600.00 2
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201Supplies Expense1432.50 201Utilities Expense0.00 201Interest Expense19120.00 Total734853.50734853.50 3. Produce Income Statement Income Statement:This statement include all the profit related to the organixation as well as all the expenditure which required to record for the analysis that company is in profitable phase or not. Income Statement of Paul Services Limited At the end of 30th June, 2016 IncomesAmount ($) Revenue191000 Add: Earned Portion of Unearned Revenue11950 Total Revenue202950 Less: Supplies Expense-1432.5 Earnings before Interest and Tax (A)201517.5 Expenses$ Advertising1800 Automobile5775 Depreciation on Furniture8000 Depreciation on Equipment18000 Depreciation on Store Equipment28000 Depreciation on Automobile38000 Insurance1500 Maintenance6300 Miscellaneous1155 Rent0 4
Utilities0 Interest19120 Total Expenses (B)127650 Net Profit [(A)-(B)]73867.5 4. Journalise closing entries Journalising the closing entries DateParticularsDebit ($)Credit ($) 30/06/16Revenue A/C191000 Unearned Revenue A/c11950 To Income Summary A/C202950 30/06/16Income Summary A/C129082.5 To Supplies Expense A/c1432.5 To Interest Expense A/C19120 To Depreciation Expense on Furniture8000 To Depreciation Expense on Equipment18000 To Depreciation Expense on Store Equipment28000 To Depreciation Expense on Automobile38000 To Advertising Expense A/C1800 To Automobile Expense A/C5775 To Maintenance A/C6300 5
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To Miscellaneous A/C1155 To Rent Expense A/C0 To Utilities A/C0 To Insurance A/C1500 30/06/16Income Summary A/C73867.5 To Retained Earnings A/C73867.5 5. Create changes in Equity and Balance sheet Statement of change in Equity:Change in the organizational equity is mentioned in the statement of change in equity where shareholder of the company analyse that their investment provide high or low returns(Bartov and Mohanram, 2014). This statement include the deep analysis and it include the all required information which help the business to prepare this statement which include shareholder's funds in the organization. Changes in Equity of Paul Particulars$ Paul's Capital54341 Less: Drawings-191 Add: Retained Earnings73867.5 Net Paul's Capital128017.5 Balance Sheet:This statement is the part of the financial accounting which shows actual position of the business. It include assets or liability of the company which helps the owner to analyse their business performance. These information required by the shareholder in order to take their decision of making further investment or not. Balance sheet help the business to analyse their actual position and create market image in order to attract stakeholders. Balance Sheet of Paul Services as at June 30, 2016 Assets$$ 6
Current Assets Cash at Bank91390 Accounts Receivable30460 Supplies477.5 Prepaid Insurance3820 Total Current Assets (A)126147.5 Fixed Assets Furniture39800 Equipment77600 Store Equipment115400 Automobile153200 Total Fixed Assets (B)386000 Total Assets [(A)+ (B) = C]512147.5 Equity and Liabilities Current Liabilities Accounts Payable60920 Interest Payable110500 Unearned Revenue11950 Total Current Liabilities (D)183370 Long-Term Liabilities Loan Payable9560 Mortgage Payable191200 Total Long-Term Liabilities (E)200760 Total Liabilities [(D) + (E) = F]384130 Equity Paul's Capital128017.5 Total Equity (G)128017.5 Total Equity and Liabilities (F) + (G)512147.5 7
*Working Notes: Depreciation Adjustments ParticularsAmount Furniture47800 Less: Depreciation-8000 Net Value of Furniture39800 Equipment95600 Less: Depreciation-18000 Net Value of Equipment77600 Store Equipment143400 Less: Depreciation-28000 Net Value of Store Equipment115400 Automobile191200 Less: Depreciation-38000 Net Value of Automobile153200 6. Answer the following Questions (A) Trail Balance and the reason of preparing it: Trail Balance:It is a accounts which include the ledger accounts balance with their name for the purpose of preparing closing accounts. It is also called book keeping process to record financial transaction. Trial balance have to two sides where they record each transaction such as debit or credit. Every entry recorded as per their nature and it can be prepared on monthly or yearly basis(Bonner, Clor-Proell and Koonce, 2014). But mostly organization prepared on annual basis at the end of the financial year and it will make sure that each entry will be correctly and posted in right side of the accounts. Purpose of preparing trail balance is to make sure that each transaction will be recorded in well manner. Along with this, it help the 8
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manager or accountant to identify the error which enable to provide the equal balance of the debit or credit side. Reasons of preparing Trail Balance: ï‚·Biggest reason of prepare trial balance is to be identify the mathematical error or any mistake at the time of recording transaction. ï‚·Another reason it that, it help the organization to analyse their accounts and each entries which further provide the information weather information is correct or not. ï‚·It also helps in identifying any mistake, error, omission of entries etc. and it will be formulated by the organization(Del Negro and Sims, 2015).ï‚·Company have to build trail balance because it further helps in preparing financial statement which is very important for the future decision making process. (B) Adjustment Entries and it's reasons: Adjustment Entries:It is those types of entries which is used by the company in order to provide accurate results. It include those entries which is mistakenly not recorded in journal entry. It will create different while preparing trail balance and nit provide the actual balance of the business(Lawrence, 2019). These adjustment will be done at the end of financial year when organizations close their accounts for the final results. It include the various types of adjustment entries such asaccrued expenses, revenues, prepaid expenses, depreciation, amortisation, reserves, allowance for doubtful accounts, etc. With the help of these adjusted entries companies able to determine their actual financial position. Reason of recording Adjustment entries: ï‚·It will helps in analysing the accuracy of trial balance of the organization(Durham and Basch, 2015).ï‚·These entries required to match their debit or credit balance in order to produce accurate financial statements. (C) Purpose of developing adjusted Trail Balance: Purpose of writing Adjustment Entry: ï‚·Purpose of adjustment entries is to provide accurate balance of debit or credit side of trail balance with the help of accrual basis. ï‚·These entries will be done due to avoiding the unequal balance of trail balance. 9
ï‚·For the accurate or true result of the transactions which help the further users to make their decision. (D) Difference between adjustment or closing journal entries: Adjustment entries:It will done due to balance their trial balance amount where debit or credit side of accounts are required to same. But if it is not happen then accountant have to pass adjustment entry for the accurate results(Fay and Negangard, 2017). Closing entries:It is those entries which required to pass at the end year of financial year for the final adjustment. This entry pass for covering all the accounts balance with zero and it is called closing entry. It is made for the different items such as revenue, expenses, dividend drawings etc. Difference between closing and adjustment entries: Adjustment entry are made at the end of the financial year after preparing trial balance and it is required for balancing debit or credit balance. On the other hand, closing entries are adjusted after preparing final accounts so trial balance will be converted to zero balance. Adjustment entries are made when individual mistakenly nor record the entry and it will generate dis balance in the amounts(Kapan and Minoiu, 2013). Closing entries are done for the formulation of temporary accounts into permanent accounts. CONCLUSION From the above discussion, it has been concluded that accounting help the organization to record or maintain their each transaction on daily basis. It further helps the organization to maintain in a specific manner such as firstly pass the journals, ledger posting, trial balance, profit or loss accounts and then balance sheet. With the help of these accounts organization able to evaluate their actual performance and then analyse weather it is good or not. 10