BACT105 Business Accounting: Trial Balance and Adjustments Report

This business accounting report delves into the intricacies of trial balances, adjusting entries, and the preparation of financial statements. It covers key aspects such as the purpose and creation of trial balances, including identifying errors and reconciling balances. Adjusting entries, their necessity, and categories like accruals, deferrals, and estimates are explained. The report also discusses the purpose of writing an adjusted trial balance and highlights the differences between adjusting and closing journal entries, providing a comprehensive overview of essential accounting processes. The document includes numerical examples and balance sheets to illustrate the concepts. Desklib provides a platform for students to access similar solved assignments and past papers.

Running Head: BUSINESS ACCOUNTING 0
Business Accounting

BUSINESS ACCOUNTING 1
Table of Contents
Question-1..................................................................................................................................2
Question-2..................................................................................................................................3
Question-3..................................................................................................................................6
Question-4..................................................................................................................................7
Question-5..................................................................................................................................8
Question-6..................................................................................................................................9
Trial balance overview...........................................................................................................9
Purpose for Creation.............................................................................................................10
Adjusting entries...................................................................................................................11
Purpose of writing an adjusted trial balance.........................................................................11
Difference between the adjustment entries and closing journal entries...............................12
References................................................................................................................................14

BUSINESS ACCOUNTING 2
Question-1
Particulars Debit Credit
Interest Expense A/c Dr. 12800
To Interest Payable A/c 12800
(for interest accrued on the mortgage but not paid)
Supplies Expense A/c Dr. 320
To Supplies A/c 320
(for ending supplies in hand recorded)
Insurance expense A/c Dr. 512
To Prepaid 512
(for reversal of prepaid insurance)
Prepaid Insurance 2560
To Insurance Expense 2560
(for adjustment entry passed)
Insurance Dr. 460
To Cash 460
(for amount paid )
Depreciation Expense- Furniture 6000
Depreciation Expense- office Equipment 12000
Depreciation Expense- Store Equipment 8700
Depreciation Expense- Automobile 12000

BUSINESS ACCOUNTING 3
To Accumulated Depreciation 38700
(for depreciation adjusted )
Cash A/c Dr. 8000
To unearned Revenue 8000
Unearned Revenue Dr. 8000
To Revenue 8000
Question-2
Paul services Trial Balance As At 30 June 2016
Accoun
t No Account Name Debit
Credi
t Adjustments
Final
Trial
Debit
Credi
t Debit Credit
101 Cash at Bank
27560.
00 8000 460
35100.
00
105 Accounts Receivable
9190.0
0
9190.0
0 0.00
115 Supplies
1280.0
0 320 960.00
120 Prepaid Insurance
2560.0
0 512
2048.0
0
135 Office Furniture
32000.
00
32000.
00 0.00

BUSINESS ACCOUNTING 4
137 Acc. Depreciation. - Furniture 0.00 6000 0.00
6000.0
0
140 Office Equipment
64000.
00
64000.
00 0.00
141 Acc. Depreciation - Equipment 0.00
1200
0 0.00
12000.
00
145 Store Equipment
96000.
00
96000.
00 0.00
146 Acc. Depreciation - Equipment 0.00 8700 0.00
8700.0
0
170 Automobile
12800
0.00
128000
.00 0.00
171 Acc. Depreciation - Automobile 0.00
1200
0
12000.
00
201 Accounts Payable
18380.
00
18380.
00
201 Interest Payable
27570.
00
1280
0
40370.
00
201 Unearned revenue
16000.
00 8000 8000
16000.
00
201 Loan Payable
6400.0
0
6400.0
0
201 Mortgage Payable
12800
0.00
12800
0.00
201 Paul's Capital 46498. 46498.

BUSINESS ACCOUNTING 5
00 00
201 Paul's Drawings 128.00 128.00
201 Revenue
12800
0.00 8000
13600
0.00
201 Advertising Expense 600.00 600.00
201 Automobile Expense
5775.0
0
5775.0
0
201
Depreciation Expense -
Furniture 0.00 6000
6000.0
0
201
Depreciation Expense -
Equipment 0.00
1200
0
12000.
00
201
Depreciation Expense -
Store Equipment 0.00 8700
8700.0
0
201
Depreciation Expense -
Automobile 0.00
1200
0
12000.
00
201 Insurance Expense 500.00 972
1472.0
0
201 Maintenance Expense
2100.0
0
2100.0
0
201 Miscellaneous Expense
1155.0
0
1155.0
0
201 Rent Expense 0.00 0.00
201 Supplies Expense 0.00 320 320.00
201 Utilities Expense 0.00 0.00
201 Interest Expense 0.00 1280 12800.

BUSINESS ACCOUNTING 6
0 00
37084
8.00
37084
8.00
6879
2.00
6879
2.00
430348
.00
43034
8.00
Office Furniture after Depreciation Office Equipment after Depreciation
Office Furniture 32000 Office Equipment 64000
Residual value 2000 Residual value 4000
Estimated useful life 5 Estimated useful life 5
Depreciation 6000 Depreciation 12000
Closing Value 26000 Closing Value 52000
Store Equipment after Depreciation Automobile after Depreciation
Store Equipment 93000 Office Furniture 128000
Residual value 6000 Residual value 8000
Estimated useful life 10 Estimated useful life 10
Depreciation 8700 Depreciation 12000
Closing Value 84300 Closing Value 116000
Question-3
Particulars Amount
Revenue 136000.00
Expenses
Advertising Expense 600.00
Automobile Expense 5775.00
Depreciation Expense - Furniture 6000.00

BUSINESS ACCOUNTING 7
Depreciation Expense - Equipment 12000.00
Depreciation Expense - Store
Equipment 8700.00
Depreciation Expense - Automobile 12000.00
Insurance Expense 1472.00
Maintenance Expense 2100.00
Miscellaneous Expense 1155.00
Rent Expense 0.00
Supplies Expense 320.00
Utilities Expense 0.00
Interest Expense 12800.00
Profit/ loss 73078.00
Question-4
Journalise the Closing
Entries
Date Particulars Debit Credit
Profit and Loss
A/c Dr. 73078.00
To General expenses 73078.00
(for all the expenses transferred)

BUSINESS ACCOUNTING 8
Question-5
Balance Sheet
Particulars Amount
Paul's Capital 46498.00
Paul's Drawings 128.00
Add: Net Profits 73078.00
Total Capital 119448.00
Interest Payable 40370.00
Unearned revenue 16000.00
Loan Payable 6400.00
Accounts Payable 18380.00
Mortgage Payable 128000.00
Total 328598.00
Cash at Bank 35100.00
Accounts Receivable 9190.00
Supplies 960.00
Prepaid Insurance 2048.00
Office Furniture 32000.00
Office Equipment 64000.00
Store Equipment 96000.00
Automobile 128000.00
Less: accumulated
Depreciation 38700.00 281300.00

BUSINESS ACCOUNTING 9
Total 328598.00
Question-6
Trial balance overview
A trial balance is an accounting book which helps in maintaining the organisations general
and ledger accounts. In this book of accounts all the debit balances are maintained in the
debit column of the book and the credit balances are maintained in the credit column of the
book. The balance of both the columns should be identical in nature. Such book of
accounting helps in finding errors in the financial statements of the organisation. Such a
statement is useful for the auditors in order to identify the errors of the company to audit the
accounts. Such errors are resolved by the auditors and an audit report is made on the basis of
such financial statements (Baxter and Davidson, 2014).
Under the traditional system the preparation of the trial balance was initially started by the
accountant. However under the current system of the accounting the accounting software has
been installed in the organisation in order to create more accuracy and the transparency
among the organisation. The manual system is a conventional system and it is time
consuming on the other hand the computerised system is the key component which follows
the double entry system and the system of accounting as well (Carey, Knowles and Towers-
Clark, 2017).
Purpose for Creation
The purpose for which the trial balance is created is similar for any kind of the organisation
and therefore the reasons are specifically presented below. The reason for creation of trail
balance is to identify all the errors that have been made while recording the transactions of

BUSINESS ACCOUNTING 10
the organisation. The purpose for the creation of trail balance is proved when all the credit
balances of the statement matches with all the debit balances of the statement. Such error
helps in rectification of entries and helps in preparing the profit and loss statement of the
organisation. Such a statement is prepared by the book keeper of the accounts who maintains
the daily record of transactions in the books of accounts (Kuter, Gurskaya, Andreenkova and
Musaelyan, 2017).
The Trial Balance helps in identifying all the errors which are in the form of omission, error
of commission, error in original journal entry, error of principle, compensating errors and the
error of reversal. Such errors help in preparation of financial statements. The purpose of
creation of trial balance is to help the organisation in reconciliation of the balances. The trail
balance also ensures that every entry is recorded in the financial statements. In case of any
error the trail balance helps in rectifying those entries (Ellerman, 2014).
Adjusting entries
When a transaction starts in one accounting period and ends in the different accounting
period than the adjusting entry is required definitely. In simpler terms the adjusting entry can
also be known as the reporting entries that are used to rectify and reconcile the mistakes
attempted in the past years. The adjusting entry is also termed as the balance day adjustment.
The accounts that are involved with the adjusting entries are the income statement and the
balance sheet and this type of entry is typically relatable to the accrued expense, accrued
revenue, prepaid expenses and unearned revenue (Fanning and Grant, 2017). The entries are
also passed keeping in mind the matching principle concept in order to match the revenue and
the expenses and these kind of the adjustments are also carried forward to the account ledgers
and the worksheet of the accounting in the next accounting cycle step. The common
characteristics of an adjusting entry are that it will involve the incomes and expenses and the

BUSINESS ACCOUNTING 11
assets and the liabilities. In summary the adjusting journal entries are basically of the three
categories namely the accruals, deferrals and estimates (Shanklin and Ehlen, 2017).
Purpose of writing an adjusted trial balance
Normally the trial balance reflects all the accounts that are recorded in the ledgers and from
the ledgers the trial balance is prepared subject to certain changes. Once the financial
statements are prepared they are prepared using the help from the trial balance. That’s when
the adjusted trial balance came into existence. The adjusted trial balance is made with the
adjustments given apart from the trial balance. The process if the adjusted trial balance is
identical just likes the normal one. The simple reason is to match the revenues with the
expenses and the monitor the performances of the company which will be beneficial from the
point of view of the shareholders (Kramer, 2017).
The cycle of the financial statements is totally dependent on the books of accounts and the
financial statements so that the shareholders can take the decisions of the company wisely
(Harris and Dilling, 2017). The trial balance is never a part of the financial statement rather it
is a document to be used internally which has basically two purposes.
To verify that the balance of the debit side and the credit side is equal to each other and to for
the purpose of the construction of the ultimate report that is circulated among the
shareholders and the investors (Gurskaya, Kuter and Andreenkova, 2017). The second
implication of the adjusted trial balance has fallen into the vain since the computerised
accounting system has been in motion for the production of the financial statements. The trial
balance is set up before the adjusting entries and after the adjusting entries the trial balance is
the adjusted and the complete trial balance. The balances of the trial changes immediately
once the entries are adjusted. In order to be sure of the data relevancy the Trial balance is to
be 100% correct (Fang and Slavin, 2018).