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Paul services : Trial Balance

Paul Services


Trial Balance As At 30 June 2016





Account NoAccount NameDebitCredit
101Cash at Bank

105Accounts Receivable

115Supplies

120Prepaid Insurance

135Office Furniture

137Acc. Depreciation - Furniture

140Office Equipment

141Acc. Depreciation - Equipment

145Store Equpment

146Acc. Depreciation - Equipment

170Automobile

171Acc. Depreciation - Equipment

201Accounts Payable

201Interest Payable

201Unearned Revenue

201Loan Payable

201Mortgage Payable

201Paul's Capital

201Paul's Drawings

201Revenue

201Advertising Expense

201Automobile Expense

201Depreciation Expense - Furniture

201Depreciation Expense -Equipment

201Depreciation Expense - Store Equipment

201Depreciation Expense - Automobile

201Insurance Expense

201Maintenance Expense

201Miscellaneous Expense

201Rent Expense

201Supplies Expense

201Utilities Expense

201Interest Expense



00





ReconciliationHas to be





B/SP&L
Current Asset
Current Asset
Current Asset
Current Asset
Fixed Asset
Fixed Asset
Fixed Asset
Fixed Asset
Fixed Asset
Fixed Asset
Fixed Asset
Fixed Asset
Current Liability
Current Liability
Current Liability
Non Current Liability
Non Current Liability
Equity
Equity

Revenue

Expense

Expense

Expense

Expense

Expense

Expense

Expense

Expense

Expense

Expense

Expense

Expense

Expense





Adjusting Transactions














Interest has accrued on the mortgage but not paid












DRInterest Expense






CRInterest Payable













Adjustment for the period, ending supplies remains on hand $417.50










DRSupplies Expense

1252.5
Purchase = Opening B

CRSupplies


1252.5










Prepaid Insurance shows a total value remaining of $668











DRInsurance Expense

668



CRPrepaid Insurance

668










Depreciation adjustment for the period SL (Straight Line) method
Life = 5 yea








Furniture Va
DRDepreciation Expense - Furniture8000

Less: Residu

CRAccu. Depreciation - Furniture
8000
Net Furnitur









Adjustment for the period SL Method - Office Equipment

Life = 5 yea








Furniture Va
DRDepreciation Expense - Office Equipment


Less: Residu

CRAccu. Depreciation - Office Equipment

Net Furnitur









Adjustment for the period SL Method - Store Equipment

Life = 5 yea








Furniture Va
DRDepreciation Expense - Store Equipment


Less: Residu

CRAccu. Depreciation - Store Equipment

Net Furnitur









Adjustment for the period SL Method - Automobile


Life = 5 yea








Furniture Va
DRDepreciation Expense - Automobile


Less: Residu

CRAccu. Depreciation - Automobile

Net Furnitur























































41800


-1800


8000








41800


-1800


8000








41800


-1800


8000









Answer

1. 

Paul services Trial Balance As At 30 June 2016
Account NoAccount NameDebitCredit
    
101Cash at Bank299000.00 
105Accounts Receivable99670.00 
115Supplies3990.00 
120Prepaid Insurance7980.00 
135Office Furniture99800.00 
137Acc. Depreciation. - Furniture 0.00
140Office Equipment199600.00 
141Acc. Depreciation - Equipment 0.00
145Store Equipment299400.00 
146Acc. Depreciation - Equipment 0.00
170Automobile399200.00 
171Acc. Depreciation - Automobile 0.00
201Accounts Payable 199340.00
201Interest Payable 299010.00
201Unearned revenue 49900.00
201Loan Payable 19960.00
201Mortgage Payable 399200.00
201Paul's Capital 81559.00
201Paul's Drawings399.00 
201 Revenue 399000.00
201Advertising Expense6000.00 
201Automobile Expense5775.00 
201Depreciation Expense - Furniture0.00 
201Depreciation Expense - Equipment0.00 
201Depreciation Expense - Store Equipment0.00 
201Depreciation Expense - Automobile0.00 
201Insurance Expense5000.00 
201Maintenance Expense21000.00 
201Miscellaneous Expense1155.00 
201Rent Expense0.00 
201Supplies Expense0.00 
201Utilities Expense0.00 
201Interest Expense0.00 
  1447969.001447969.00
    


Paul services 

2. Adjusting Transactions As at 30 June 2016

Interest has accrued on the mortgage but not paid   
 DR  Interest Expense    39,920.00   
  CR  Interest Payable     39,920.00  
      
 Adjustment for the period, ending supplies remains on hand $997.50  
      
 DR  Supplies Expense    2,992.50   Supplies Expense = Opening Balance +Purchases - Remaining on hand 
  CR  Supplies     2,992.50  
      
Prepaid Insurance shows a total value remaining of $1596.00   
      
 DR  Insurance Expense    6,384.00   
  CR  Prepaid Insurance     6,384.00  
      
 Depreciation adjustment for the period SL (Straight Line) method   Life = 5 years, Residual Vlaue = 0 
      Dep = (cost of furniture - residual value)/ life 
 DR  Depreciation Expense - Furniture   19,960.00   
  CR  Accu. Depreciation - Furniture   19,960.00  
      
 Adjustment for the period SL Method - Office Equipment   
      Life = 5 years, Residual Vlaue = 0 
 DR  Depreciation Expense - Office Equipment    39,920.00   Dep = (cost of equipment - residual value)/ life 
  CR  Accu. Depreciation - Office Equipment    39,920.00  
      
Adjustment for the period SL Method - Store Equipment   
      Life = 10 years, Residual Vlaue = 0 
 DR  Depreciation Expense - Store Equipment    29,940.00   Dep = (cost of  store equipment - residual value)/ life 
  CR  Accu. Depreciation - Store Equipment    29,940.00  
      
 Adjustment for the period SL Method - Automobile   
      Life = 10 years, Residual Vlaue = 0 
 DR  Depreciation Expense - Automobile    39,920.00   Dep = (cost of  Automobile - residual value)/ life 
  CR  Accu. Depreciation - Automobile     39,920.00  
      
 Adjustment for the portion of unearned revenue which is earned at the end of June   
     
 DR  Unearned Revenue    24,950.00  
  CR Revenue     24,950.00 


3. Worksheet After posting the Adjustment Entries 

Paul Services
Adjusted Trial Balance As At 30 June 2016
  Trial BalanceAdjustmentsAdjusted Trial Balance
Account NoAccount NameDebitCreditDebitCreditDebitCredit
        
101Cash at Bank299000.00   299000.00 
105Accounts Receivable99670.00   99670.00 
115Supplies3990.00  2992.50997.50 
120Prepaid Insurance7980.00  6384.001596.00 
135Office Furniture99800.00   99800.00 
137Acc. Depreciation. - Furniture 0.00 19960.00 19960.00
140Office Equipment199600.00   199600.00 
141Acc. Depreciation - Equipment 0.00 39920.00 39920.00
145Store Equipment299400.00   299400.00 
146Acc. Depreciation - Equipment 0.00 29940.00 29940.00
170Automobile399200.00   399200.00 
171Acc. Depreciation - Automobile 0.00 39920.00 39920.00
201Accounts Payable 199340.00   199340.00
201Interest Payable 299010.00 39920.00 338930.00
201Unearned revenue 49900.0024950.00  24950.00
201Loan Payable 19960.00   19960.00
201Mortgage Payable 399200.00   399200.00
201Paul's Capital 81559.00   81559.00
201Paul's Drawings399.00   399.00 
201 Revenue 399000.00 24950.00 423950.00
201Advertising Expense6000.00   6000.00 
201Automobile Expense5775.00   5775.00 
201Depreciation Expense - Furniture0.00 19960.00 19960.00 
201Depreciation Expense - Equipment0.00 39920.00 39920.00 
201Depreciation Expense - Store Equipment0.00 29940.00 29940.00 
201Depreciation Expense - Automobile0.00 39920.00 39920.00 
201Insurance Expense5000.00 6384.00 11384.00 
201Maintenance Expense21000.00   21000.00 
201Miscellaneous Expense1155.00   1155.00 
201Rent Expense0.00   0.00 
201Supplies Expense0.00 2992.50 2992.50 
201Utilities Expense0.00   0.00 
201Interest Expense0.00 39920.00 39920.00 
 Reconciliation1447969.001447969.00203986.50203986.501617629.001617629.00


4. Income Statement from the worksheet

Paul Services  
Income Statement for the Year Ending 30 June 2016
   
 Revenue 423950.00
Less: Expenses  
Advertising Expense6000.00 
Automobile Expense5775.00 
Depreciation Expense - Furniture19960.00 
Depreciation Expense - Equipment39920.00 
Depreciation Expense - Store Equipment29940.00 
Depreciation Expense - Automobile39920.00 
Insurance Expense11384.00 
Maintenance Expense21000.00 
Miscellaneous Expense1155.00 
Rent Expense0.00 
Supplies Expense2992.50 
Utilities Expense0.00 
Interest Expense39920.00 
Total Expenses
217966.50
Net Income
205983.50


5. Journalize the Closing Entries

Paul Services – Closing Entries as at 30 June 2018

Close the Revenue Account
     
 DR Revenue423,950.00 
  CR Income Acc 423,950.00
     
Close Expenses Accounts
     
 DR Income Account217966.50 
  CR Advertising Expense 6000.00
  Automobile Expense 5775.00
  Depreciation Expense - Furniture 19960.00
  Depreciation Expense - Equipment 39920.00
  Depreciation Expense - Store Equipment 29940.00
  Depreciation Expense - Automobile 39920.00
  Insurance Expense 11384.00
  Maintenance Expense 21000.00
  Miscellaneous Expense 1155.00
  Supplies Expense 2992.50
  Interest Expense 39920.00
     
Transfer Income Account to capital Account  
     
 DR Income Account205,983.50 
  CR Paul's capital 205,983.50


6. Changes in Equity And Balance Sheet

Paul Services

Changes in Equity As At 30 June 2016

Paul's Capital at the beginning of the year81559.00
Less: Drawings
-399.00


81160.00
Add: Income During the Year
205983.50
Paul's Capital as at 30 June 2018287143.50


Paul Services

Balance Sheet  As At 30 June 2016

  Assets Liabilities
Cash at Bank 299000.00  
Accounts Receivable 99670.00  
Supplies 997.50  
Prepaid Insurance 1596.00  
Office Furniture99800.00   
Less: Acc. Depreciation.-19960.00   
Net office Furniture 79840.00  
Office Equipment199600.00   
Less: Acc. Depreciation.-39920.00   
Net office Equipment 159680.00  
Store Equipment299400.00   
Less: Acc. Depreciation.-29940.00   
Net Store Equipment 269460.00  
Automobile399200.00   
Less: Acc. Depreciation.-39920.00   
Net Automobile 359280.00  
Accounts Payable   199340.00
Interest Payable   338930.00
Unearned revenue   24950.00
Loan Payable   19960.00
Mortgage Payable   399200.00
Paul's Capital   287143.50
Total
1269523.50 1269523.50



7. Answer the following questions considering proper referencing;

1)       What is a trial balance, why do we create it?

Answer:

Trial balance is a bookkeeping report/worksheet. It is prepared at the end of the year. The trial balance lists the balances of all the accounts prepared in the business ledger. The balances are listed in two columns. The accounts having debit balances in Debit column and the account with credit balances are listed on Credit columns. The trial balance serves as the initial check on mathematical accuracy of the accounts. The debit and credit balances of the two columns should match. If they do not match, it shows there is some mathematical error in book keeping (Accounitngcoach.com).    Trial balance  helps in preparing the financial statement and is the basic report of the book keeping system. 

2)       What are adjustment journal entries? Why do we record the adjustment journal entries?

Answer:

Adjustment journal entries are made at the end of the financial period in the journal book of the business. The entries help in allocating the income and expenses to the period in which they are actually earned and accrued.  Like the revenues that has been earned and not received are recorded and similarly the expenses accrued but not paid are paid. The entries help in maintaining the books according to the accrual basis of accounting by adjusting the transaction made under the cash basis of accounting (balckline.com).   

The major entries made using the Adjusting journal are as follows:

Where there is prepayment of an expense, allocating the expense  to the period in which the expense is incurred and transferring the remaining to the prepaid account

Where there is accrued  revenue for the year that has been earned but not received, recognize it during the period in which it is earned even though it is not received and if the revenues are received in advance allocating it to the period in which it is earned. 

Where there are accrued expenses that are paid later, the expenses are recognized in the books in the period in which the expense is incurred.

The entries are used to provide for non cash transactions like the depreciation and amortization of assets. 

The adjustment entries are also used to correct the mistakes in the books which are discovered later. 


3)      What is the purpose of writing an adjusted Trial balance?

Answer:

The adjusted trial balance is the list of all the ledger accounts after the adjusting entries have been made.  The adjusting entries are made to correct any mistakes that were discovered in the books of account and   to keep the books up-to- date as per the accrual system of accounting.  Thus the adjusted trail balance is free from all possible errors and mistakes and ensures that the accounts balance are in compliance with the  generally accepted accounting standards. The balances from the adjusted trial balance can now be directly used to prepare the final financial statements of the business.  Thus the adjusted trial balance serves as the basis for preparing the financial statements like the income statement, changes in equity statement and balance sheet of the business (accountingtools.com).  

The adjusted trial balance is not part of the financial statements - rather, it is an internal report that helps in preparing the financial statements. 

4)      How adjustment journal entries are different from the closing journal entries?

Answer:

Adjusting entries and closing entries both are made at the end of the year. However the two are different from each other.

Adjustment entries are made at the end of the accounting period but before the preparation of the financial statements. They serve the purpose of correcting any error made in the books of accounts or make the entries which are essential to maintain the books according to the accrual basis of accounting. Thus the adjustment entries complete the ledger accounts   which can be used to prepare the financial statements. 

Closing entries are made after the financial statements are prepared though they are dated as of the last day of the accounting period. The closing entries mainly involve the income statement accounts. The entries transfer all the revenue accounts and expenses accounts to the income account so that the income and expense accounts become zero. Thus they close down the temporary account opened during the accounting period and hence are called the closing entries. After the closing entries are made the accounts left in the books of account are the assets accounts, liabilities account and capital accounts, which are reflected in the balance sheet. The accounts left opened are the permanent accounts also known as balance sheet accounts which are carried forward to the next accounting period. The closing entries serve the purpose of closing the books of accounts for the accounting period (accountingcoach.com). 

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