|
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 |
|
|
|
To Accumulated Depreciation |
|
|
|
38700 |
|
|
(for depreciation adjusted ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash A/c |
|
|
Dr. |
8000 |
|
|
To unearned Revenue |
|
|
|
8000 |
|
|
|
|
|
|
|
|
|
Unearned Revenue |
|
|
Dr. |
8000 |
|
|
To Revenue |
|
|
|
|
8000 |
|
|
|
|
|
|
|
|
Paul services Trial Balance As At 30 June 2016 |
|
|
|
|
|||
|
Account No |
Account Name |
Debit |
Credit |
Adjustments |
Final Trial |
|
|
|
|
|
|
|
Debit |
Credit |
Debit |
Credit |
|
101 |
Cash at Bank |
27560.00 |
|
8000 |
460 |
35100.00 |
|
|
105 |
Accounts Receivable |
9190.00 |
|
|
|
9190.00 |
0.00 |
|
115 |
Supplies |
1280.00 |
|
|
320 |
960.00 |
|
|
120 |
Prepaid Insurance |
2560.00 |
|
|
512 |
2048.00 |
|
|
135 |
Office Furniture |
32000.00 |
|
|
|
32000.00 |
0.00 |
|
137 |
Acc. Depreciation. – Furniture |
0.00 |
|
6000 |
0.00 |
6000.00 |
|
|
140 |
Office Equipment |
64000.00 |
|
|
|
64000.00 |
0.00 |
|
141 |
Acc. Depreciation – Equipment |
0.00 |
|
12000 |
0.00 |
12000.00 |
|
|
145 |
Store Equipment |
96000.00 |
|
|
|
96000.00 |
0.00 |
|
146 |
Acc. Depreciation – Equipment |
0.00 |
|
8700 |
0.00 |
8700.00 |
|
|
170 |
Automobile |
128000.00 |
|
|
|
128000.00 |
0.00 |
|
171 |
Acc. Depreciation – Automobile |
0.00 |
|
12000 |
|
12000.00 |
|
|
201 |
Accounts Payable |
|
18380.00 |
|
|
|
18380.00 |
|
201 |
Interest Payable |
|
27570.00 |
|
12800 |
|
40370.00 |
|
201 |
Unearned revenue |
|
16000.00 |
8000 |
8000 |
|
16000.00 |
|
201 |
Loan Payable |
|
6400.00 |
|
|
|
6400.00 |
|
201 |
Mortgage Payable |
|
128000.00 |
|
|
|
128000.00 |
|
201 |
Paul’s Capital |
|
46498.00 |
|
|
|
46498.00 |
|
201 |
Paul’s Drawings |
128.00 |
|
|
|
128.00 |
|
|
201 |
Revenue |
|
128000.00 |
|
8000 |
|
136000.00 |
|
201 |
Advertising Expense |
600.00 |
|
|
|
600.00 |
|
|
201 |
Automobile Expense |
5775.00 |
|
|
|
5775.00 |
|
|
201 |
Depreciation Expense – Furniture |
0.00 |
|
6000 |
|
6000.00 |
|
|
201 |
Depreciation Expense – Equipment |
0.00 |
|
12000 |
|
12000.00 |
|
|
201 |
Depreciation Expense – Store Equipment |
0.00 |
|
8700 |
|
8700.00 |
|
|
201 |
Depreciation Expense – Automobile |
0.00 |
|
12000 |
|
12000.00 |
|
|
201 |
Insurance Expense |
500.00 |
|
972 |
|
1472.00 |
|
|
201 |
Maintenance Expense |
2100.00 |
|
|
|
2100.00 |
|
|
201 |
Miscellaneous Expense |
1155.00 |
|
|
|
1155.00 |
|
|
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 |
|
12800 |
|
12800.00 |
|
|
|
|
370848.00 |
370848.00 |
68792.00 |
68792.00 |
430348.00 |
430348.00 |
|
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 |
|
Particulars |
Amount |
|
Revenue |
136000.00 |
|
|
|
|
Expenses |
|
|
Advertising Expense |
600.00 |
|
Automobile Expense |
5775.00 |
|
Depreciation Expense – Furniture |
6000.00 |
|
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 |
|
|
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) |
|
|
|
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 |
|
|
|
|
|
|
|
|
|
Total |
|
328598.00 |
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).
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 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).
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 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).
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).
Not only trial balance at times helps to save the business of the organisation but it builds a greater image on part of the management. The business is kept away from the issues of legal as well as the audit matters and it has so many uses. All the major financial statements are prepared from the use of the adjusted trial balance only. Further if there is any difference in the financial statements than the same are considered as unacceptable (Weil, Schipper and Francis, 2013).
The difference in the closing entries and the adjusting entry is for a particular thing and that is timing. Under the process of recording the adjusting journal entries the entries are generally recorded post recording all the transactions and in the process of recording the closing entries these entries are generally recorded after the financial statements are prepared. One of the good reasons of maintaining the books of accounts is to keep a proof with the organisation of the past years and also gives the comparative benefit. The up to date financial data is also reliable and very useful in the eyes of the investors and the shareholders. The example of outstanding expenses is a sound example to depict the adjustment entries treatment (Baydoun, Sulaiman,Willett and Ibrahim, 2018). The incomes that is outstanding for the current year such as salary outstanding and not paid till the end of the year. For this purpose the salary needs to be adjusted with the assistance of the adjusting entry. For example salary outstanding for one employee is 5000.
|
Salary A/c |
5000 |
|
|
|
|
To Salary Outstanding A/C |
|
260 |
The rest of the expenses are directly transferred to their respective account. The closing entries on the other hand are deliberately recorded once the financial statements are perfectly related. The journal entries are involved while closing the accounts. The fundamental of the closing entry is that the revenue and the expenses are recorded and the difference between them is zero. This purely means that the new entries will came into existence once the year has been finished from the scratch (Thornton, 2018).
Baxter, W.T. and Davidson, S. eds. (2014) Studies in accounting (Vol. 4). California: Routledge.
Baydoun, N., Sulaiman, M., Willett, R.J. and Ibrahim, S., (2018). Principles of Islamic Accounting. United States: John Wiley & Sons.
Best Practices for Validation for an Upgrade or New ERP System. Boston: Cengage Learning
Carey, M., Knowles, C. and Towers-Clark, J. (2017) Accounting: a smart approach. London: Oxford University Press.
Ellerman, D., (2014) On double-entry bookkeeping: The mathematical treatment. Accounting Education, 23(5), pp.483-501.
Fang, J. and Slavin, N.S., (2018) Cash is King: An Easy Way to Understand Debits and Credits. GSTF Journal on Business Review (GBR), 4(1).
Fanning, K. and Grant, R., (2017) Manual vs. Computerized Practice Set: Which Achieves Learning Objectives the Best?. AIS Educator Journal, 12(1), pp.25-33.
Gurskaya, M., Kuter, M. and Andreenkova, A., (2017) December. The Analysis of the Final “Debtors” Section Page Preparation in the Trial Balance of Giovanni Farolfi’s Company Branch Office. In International Conference on Information Technology Science (pp. 185-194). New York: Springer
Harris, P. and Dilling, P., (2017) Case Study: Consolidated Balance Sheet At Date Of Purchase. Journal of Business Case Studies (Online), 13(1), p.1.
Kuter, M., Gurskaya, M., Andreenkova, A. and Musaelyan, A., (2017) December. The Virtual Reconstruction of the Earliest Double-Entry Accounting Ledger. In International Conference on Information Technology Science (pp. 169-184). New York: Springer
Shanklin, S.B. and Ehlen, C.R., (2017) Extending the Use and Effectiveness of the Monopoly® Board Game as an In-Class Economic Simulation in the Introductory Financial Accounting Course. American Journal of Business Education, 10(2), pp.75-80.
Thornton, S.C., (2018) A Collection of Case Studies on Financial Accounting Concepts (Doctoral dissertation, University of Mississippi). United States: John Wiley & Sons.
Weil, R.L., Schipper, K. and Francis, J., (2013) Financial accounting: an introduction to concepts, methods and uses. Boston: Cengage Learning.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
