activities The following accounts and corresponding balances were drawn from Crimson Sports Inc.’s Year 2 and Year 1 year-end balance sheets. Assume that Accounts Payable is used for purchases of inventory only. Account Title Year 2 Year 1 Accounts receivable $31,000 $36,000 Merchandise inventory 70,000 65,000 Prepaid insurance 25,000 24,000 Accounts payable 18,000 20,000 Salaries payable 5,100 4,500 Unearned service revenue 10,200 9,500 The Year 2 income statement is shown as follows. Income Statement Sales $ 495,000 Cost of goods sold (215,000) Gross margin 280,000 Service revenue 20,000 Insurance expense (42,000) Salaries expense (122,000) Depreciation expense (12,000) Operating income 124,000 Gain on sale of equipment 1,500 Net income $ 125,500 the difference between cash flow from operating activities and the net loss for this company
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
activities
The following accounts and corresponding balances were drawn from Crimson Sports Inc.’s Year 2 and Year 1 year-end balance sheets. Assume that Accounts Payable is used for purchases of inventory only.
Account Title
Year 2
Year 1
Accounts receivable
$31,000
$36,000
Merchandise inventory
70,000
65,000
Prepaid insurance
25,000
24,000
Accounts payable
18,000
20,000
Salaries payable
5,100
4,500
Unearned service revenue
10,200
9,500
The Year 2 income statement is shown as follows.
Income Statement
Sales
$ 495,000
Cost of goods sold
(215,000)
Gross margin
280,000
Service revenue
20,000
Insurance expense
(42,000)
Salaries expense
(122,000)
Depreciation expense
(12,000)
Operating income
124,000
Gain on sale of equipment
1,500
Net income
$ 125,500
the difference between
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