Business Accounting Assignment: Trial Balance, Adjustments, KIA

This business accounting assignment from Kent Institute of Australia (KIA) addresses key concepts such as trial balances, adjusting journal entries, and closing entries. It includes practical exercises like preparing journal entries for accrued interest and supplies, constructing an adjusted trial bala...Read More

BUSINESS
ACCOUNTING
ASSIGNMENT
ANKUR PATEL
K170960
KENT INSITUTE OF AUSTRALIA

Contents
Question-1............................................................................................................................................................1
Question-2............................................................................................................................................................1
Question-3............................................................................................................................................................3
Question-4............................................................................................................................................................3
Question-5............................................................................................................................................................3
Question-6............................................................................................................................................................4
Trial balance....................................................................................................................................................4
Reason for Creation......................................................................................................................................4
Reason for recording...................................................................................................................................5
Purpose of writing an adjusted trial balance......................................................................................5
Difference between the adjustment entries and closing journal entries.................................6
References...........................................................................................................................................................7

Question-1
Particulars Debit Credit
Interest Expense A/c Dr. 134800
To Interest Payable A/c 134800
(for interest accrued on the mortgage but not paid)
Supplies Expense A/c Dr. 3370
To Supplies A/c 3370
(for ending supplies in hand recorded)
Insurance expense A/c Dr. 5392
To Prepaid 5392
(for reversal of prepaid insurance)
Prepaid Insurance 26960
To Insurance Expense 26960
(for adjustment entry passed)
Insurance Dr. 6160
To Cash 6160
(for amount paid )
Depreciation Expense- Furniture 66000
Depreciation Expense- office Equipment 134000
Depreciation Expense- Store Equipment 101000
Depreciation Expense- Automobile 134000
To Accumulated Depreciation 435000
(for depreciation adjusted )
Cash A/c Dr. 84250
To unearned Revenue 84250
Unearned Revenue Dr. 84250
To Revenue 84250

Question-2
Paul services Trial Balance As At 30 June 2016
No Account Name Debit Credit Adjustments
Final
Trial
Debit Credit Debit Credit
10
1 Cash at Bank
1248130.
00 84250 6160
1326220.
00
10
5 Accounts Receivable
416040.0
0
416040.0
0 0.00
11
5 Supplies 13480.00 3370 10110.00
12
0 Prepaid Insurance 26960.00 5392 21568.00
13
5 Office Furniture
337000.0
0
337000.0
0 0.00
13
7 Acc. Depreciation. - Furniture 0.00 66000 0.00
66000.0
0
14
0 Office Equipment
674000.0
0
674000.0
0 0.00
14
1 Acc. Depreciation - Equipment 0.00 134000 0.00
134000.
00
14
5 Store Equipment
1011000.
00
1011000.
00 0.00
14
6 Acc. Depreciation - Equipment 0.00 101000 0.00
101000.
00
17
0 Automobile
1348000.
00
1348000.
00 0.00
17
1 Acc. Depreciation - Automobile 0.00 134000
134000.
00
20
1 Accounts Payable
832080.0
0
832080.
00
20
1 Interest Payable
1248120.
00 134800
138292
0.00
20
1 Unearned revenue
168500.0
0 84250 84250
168500.
00
20
1 Loan Payable 67400.00
67400.0
0
20
1 Mortgage Payable
1348000.
00
134800
0.00
20
1 Paul's Capital
204088.0
0
204088.
00
20
1 Paul's Drawings 1348.00 1348.00
20
1 Revenue
1348000.
00 84250
143225
0.00
20
1 Advertising Expense 25000.00 25000.00
20
1 Automobile Expense 5775.00 5775.00
20
1
Depreciation Expense -
Furniture 0.00 66000 66000.00
20
1
Depreciation Expense -
Equipment 0.00 134000
134000.0
0
20
1
Depreciation Expense -
Store Equipment 0.00 101000
101000.0
0
20
1
Depreciation Expense -
Automobile 0.00 134000
134000.0
0

20
1 Insurance Expense 20800.00 11552 32352.00
20
1 Maintenance Expense 87500.00 87500.00
20
1 Miscellaneous Expense 1155.00 1155.00
20
1 Rent Expense 0.00 0.00
20
1 Supplies Expense 0.00 3370 3370.00
20
1 Utilities Expense 0.00 0.00
20
1 Interest Expense 0.00 134800
134800.0
0
5216188.
00
5216188.
00
753222.
00
753222.
00
5870238.
00
587023
8.00
Office Furniture after
Depreciation
Office Equipment after
Depreciation
Office Furniture 337000 Office Equipment 674000
Residual value 7000 Residual value 4000
Estimated useful life 5 Estimated useful life 5
Depreciation 66000 Depreciation 134000
Closing Value 271000 Closing Value 540000
Store Equipment after
Depreciation Automobile after Depreciation
Store Equipment 1011000 Office Furniture 1348000
Residual value 1000 Residual value 8000
Estimated useful life 10 Estimated useful life 10
Depreciation 101000 Depreciation 134000
Closing Value 910000 Closing Value 1214000
Question-3
Particulars Amount
Revenue
1432250.
00
Expenses
Advertising Expense 25000.00
Automobile Expense 5775.00
Depreciation Expense - Furniture 66000.00
Depreciation Expense -
Equipment
134000.0
0
Depreciation Expense - Store
Equipment
101000.0
0
Depreciation Expense - 134000.0

Automobile 0
Insurance Expense 32352.00
Maintenance Expense 87500.00
Miscellaneous Expense 1155.00
Rent Expense 0.00
Supplies Expense 3370.00
Utilities Expense 0.00
Interest Expense
134800.0
0
Profit/ loss
707298.0
0
Question-4
Journalise the Closing
Entries
Date Particulars Debit Credit
Profit and Loss
A/c Dr. 707298.00
To General expenses
707298.0
0
(for all the expenses
transferred)
Question-5
Particulars Amount
Paul's Capital 204088.00
Paul's Drawings 1348.00
Add: Net Profits 707298.00
Total Capital 910038.00
Interest Payable 1382920.00
Unearned revenue 168500.00
Loan Payable 67400.00
Accounts Payable 832080.00
Mortgage Payable 1348000.00

Total 4708938.00
Cash at Bank 1326220.00
Accounts Receivable 416040.00
Supplies 10110.00
Prepaid Insurance 21568.00
Office Furniture
337000.0
0
Office Equipment
674000.0
0
Store Equipment
1011000.
00
Automobile
1348000.
00
Less: accumulated
Depreciation
435000.0
0 2935000.00
Total 4708938.00
Question-6
Trial balance
Trial balance is the practice of maintain the accounts through the assistance of the general ledger
accounts. There are two types of amount the debit amount and the credit amount. The debit
amounts are generally recorded in the debit side and the credit amount are generally recorded in
the credit side. The beauty of the trial balance lies in the alignment between the debit and the
credit side. At the end of the recording of all the transactions from general ledgers the balance is
equal in both the sides (Ellerman, 2014).
Earlier in the manual system the trial balance was prepared by the accountant or the bookkeeper
in order to find out the variances and the mismatch of the amounts, which now has been solved
through the utilisation of the accounting software such as Tally. Despite the installation of the trial
balance this does not mean that it is free from any errors.
Reason for Creation
There are certain purposes for which the trial balances are created. Those reasons are outlined
below in the detailed manner.
While preparing the trial balance there are chances that the error like transposition error may
occur. In many instances the jumbled number figures are recorded incorrectly. For example
12435 can be recorded as 13245. Therefore the introduction of the trial balance was an essential
and necessary tool which eventually helps to detect such kind of errors and the person
responsible for the mistake can also be found out easily in the organisation. There is a long list of
the people who uses the trial balance such as the shareholders, investors, creditor, management
and auditors to get an insight of the organisation in the form of the draft. The trial balance has the
unique feature that’s serves the complete requirement and provides an in-depth analysis of the
firm or the company. The rule of the double entry system can be figured out using the trial
balance (Baxter and Davidson, 2014).
Adjustment journal entry is passed using the division of all the income balances. The journal entry
is basically passed to make an adjustment of the revenues and the expenditure from the
inception since they have occurred. Adjusting journal entry can also be termed as a financial

reporting that corrects the mistake which have made in the previous years in the accounting
period. The adjusted journal entry is used to conform and make the balance with the accrual
concept. The adjusted journal entry is passed just before the preparation of the financial
statements to transfer the amount into the financial statements and reflect the clear and the
transparent picture. To manage the accounting cycles the adjusting journal entry is necessary and
a bigger picture is reflected in order to look at the economic changes of the firm (Horngren,
2012).
Reason for recording
Adjusting entries are the journal entries that are recorded at the end of the accounting period in
order to alter the ending balances of the general ledger. It is usually impossible to create the
financial statements that are fully in compliance with the accounting standards without the
adjusted journal entries being passed. Adjusting entries are recorded for the type of the
accounting transaction such as to record the depreciation and amortisation of the period, to
record a warranty reserve, when the sales reserve is created, or when any accrued expenses like
prepaid insurance or the expenses are recorded (Carey, Knowles and Towers-Clark, 2017) To
address the monthly revenue figure the adjusted entries are recorded so that the organisations
can get a clear picture of their books of accounts. The proper and the complete knowledge of the
adjustment journal entry help in knowing the future of the services. Therefore these journal
entries help in choosing the plans so business could pick up for the long term benefit. Altered
entries are by and large made up at each and every date of bookkeeping period that might be
either yearly or month to month. The report so prepared showcases the incomes that have been
earned and furthermore helps in knowing the costs that were acquired amid the bookkeeping
time frame (Warren and Jones, 2018)
Purpose of writing an adjusted trial balance
The adjusted trial balance is an internal document or a draft and not the financial statement;
rather it is used to make the financial statements of the company. The adjusted trial balance is
prepared when the listing of all the accounts and the balances are contained in the general ledger
and side by side the adjusting entries are also made. The basic purpose of the adjusted trial
balance is to have a verification of the debit and the credit balances, to verify that no adjusting
journal entry has been omitted (DWilliams, Haka,Bettner and Carcello, 2015).
Moreover in order to figure out whether the net income has been reported correctly or not and to
get an insight of the adjusting entries in the accounting duration. The primary objective of writing
the trial balance is to identify any variances among the debit and the credit balances all together.
Adjusted trial balances are introduced in the end of the bookkeeping cycle. Setting up a balanced
preliminary trial balance will help in building up the financial statements for a particular term and
before setting up balanced preliminary trial balances the yearly changes are required to be made.
The other explanation behind setting up the balanced preliminary TB is for guaranteeing
thatadjusting entries were recorded effectively (Weil, Schipper and Francis, 2013). According to
the last step through the financial statements the company performance is the major outlook in
the eyes of the creditors, investors, auditors and shareholders. If there is any variance in the
financial statements than it will not be accepted by the users of the statements (Kwok, 2017).
Difference between the adjustment entries and closing journal entries
The major variance between the adjusting journal entries and closing entries are that adjusting
entries are the time period of recording. In case of the adjusted journal entries, it is recorded at
the end of the financial year but before the preparation of the financial reports and these records
is maintained as a proof for the purpose of the organisation itself. Moreover the up to date

financial statements will be helpful for the company and the users of the same. The example of
accrual expenses is a good example to determine the adjustment entries treatment. The incomes
that are not yet received such as the interest accrued on the loan and not yet paid will be
adjusted with the help of an entry. Assuming the interest rate on $30,000 note payable is 9%
accruing the interest for one month (Laitinen, 2015).
Interest
Expense
150
Interest
Payable
15
0
The other entries posted involve the amounts for which the amounts have been already
transferred to the respective expense account already.
Closing entries on the other hand are posted on the last day of the accounting period and are
posted in the records but they are posted in the records once the financial statements are ready
(Taleb, Gibson and Hovey, 2015).
Most of the time,reports are inclusive of closing entries. The closing entries are also expected to
bring the difference to zero between the revenues and the expenses. This also means that the
revenue and expense accounts will start New Year with nothing in the accounts. This allows the
business entity to report the New Year profits and expenses that to with an ease.

References
Baxter, W.T. and Davidson, S. eds. (2014) Studies in accounting (Vol. 4). California: Routledge.
Carey, M., Knowles, C. and Towers-Clark, J. (2017) Accounting: a smart approach. London: Oxford
University Press.
DWilliams, J.R., Haka, S.F., Bettner, M.S. and Carcello, J.V., (2015) Financial and managerial
accounting.China: China Machine Press.
Ellerman, D., (2014) On double-entry bookkeeping: The mathematical treatment. Accounting
Education, 23(5), pp.483-501.
Horngren, C., Harrison, W., Oliver, S., Best, P., Fraser, D. and Tan, R., (2012) Financial
accounting.London: Pearson Higher Education AU.
Kwok, B.K. (2017) Accounting irregularities in financial statements: A definitive guide for litigators,
auditors and fraud investigators. California: Routledge.
Laitinen, E.K., (2015) Traditional versus operating cash flow in failure prediction. Journal of
Business Finance & Accounting, 21(2), pp.195-217.
Taleb, M.A., Gibson, B. and Hovey, M. (2015) Fifty years of Sustainability Accounting: does
accounting for income in business sustainability really exist?.International Journal of Accounting
and Financial Reporting, 5(1), pp.36-47.
Warren, C.S. and Jones, J. (2018) Corporate financial accounting. Boston: Cengage Learning.
Weil, R.L., Schipper, K. and Francis, J., (2013) Financial accounting: an introduction to concepts,
methods and uses.Boston: Cengage Learning.