Peter Parker Company, whose accounting year ends on December 31, provides delivery services for packages to be taken between the city and the airport. On January 1, 2015, the company acquired a delivery van from MJ Trucks. The 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.
On January 1, 2015, the company acquired a delivery van from MJ Trucks. The company paid cash of P1,020,000 to MJ, which included registration fees of P20,000. Insurance costs for the first year amounted to P24,000. The truck is expected to have a useful life of five years. At the end of its useful life, the asset is expected to be sold for P480,000, with cots relating to the sale amounting to P8,000.
On January 1, 2016, Peter Parker’s management decided to add another vehicle, a flat-top, to the fleet. The vehicle was acquired from a liquidation auction at a cash price of P600,000. The vehicle needed some repairs for the elimination of rust (cost: P46,000) and the replacement of all tires (cost: P12,400). The company believed it would use the flat-top for another two years and then sell it. Expected selling price was P300,000, with selling costs estimated to be P8,000.
On January 1, 2016, a radio communication system was installed in both vehicles at a cost per vehicle of P6,000. This was not expected to have any material effect on the future selling price of either vehicle.
Insurance costs for 2016 were P24,000 for the first vehicle and P18,000 for the newly-acquired vehicle.
On January 1, 2017, the flat-top that had been acquired at auction broke down. The company thought about acquiring a new vehicle to replace this one but, after considering the costs, decided to repair the flat-top instead. The vehicle was given a major overhaul at a cost of P130,000. Although this was a major expense, management believed that the company would keep the vehicle for another two years. The estimated selling price in three years’ time is P240,000, with selling costs estimated at P6,000. Insurance costs for 2017 were the same as for the previous year.
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