Paul Services : Trial Balance

Question :

Paul Services
Trial Balance As At 30 June 2016

Account No	Account Name	Debit	Credit
101	Cash at Bank
105	Accounts Receivable
115	Supplies
120	Prepaid Insurance
135	Office Furniture
137	Acc. Depreciation - Furniture
140	Office Equipment
141	Acc. Depreciation - Equipment
145	Store Equpment
146	Acc. Depreciation - Equipment
170	Automobile
171	Acc. Depreciation - Equipment
201	Accounts Payable
201	Interest Payable
201	Unearned Revenue
201	Loan Payable
201	Mortgage Payable
201	Paul's Capital
201	Paul's Drawings
201	Revenue
201	Advertising Expense
201	Automobile Expense
201	Depreciation Expense - Furniture
201	Depreciation Expense -Equipment
201	Depreciation Expense - Store Equipment
201	Depreciation Expense - Automobile
201	Insurance Expense
201	Maintenance Expense
201	Miscellaneous Expense
201	Rent Expense
201	Supplies Expense
201	Utilities Expense
201	Interest Expense
		0	0

	Reconciliation0 Has to be




B/S	P&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

DR	Interest Expense
	CR	Interest Payable

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

DR	Supplies Expense		1252.5		Purchase = Opening B
	CR	Supplies		1252.5

Prepaid Insurance shows a total value remaining of $668

DR	Insurance Expense		668
	CR	Prepaid Insurance		668

Depreciation adjustment for the period SL (Straight Line) method						Life = 5 yea
						Furniture Va
DR	Depreciation Expense - Furniture		8000			Less: Residu
	CR	Accu. Depreciation - Furniture		8000		Net Furnitur

Adjustment for the period SL Method - Office Equipment						Life = 5 yea
						Furniture Va
DR	Depreciation Expense - Office Equipment					Less: Residu
	CR	Accu. Depreciation - Office Equipment				Net Furnitur

Adjustment for the period SL Method - Store Equipment						Life = 5 yea
						Furniture Va
DR	Depreciation Expense - Store Equipment					Less: Residu
	CR	Accu. Depreciation - Store Equipment				Net Furnitur

Adjustment for the period SL Method - Automobile						Life = 5 yea
						Furniture Va
DR	Depreciation Expense - Automobile					Less: Residu
	CR	Accu. Depreciation - Automobile				Net Furnitur



















		41800
		-1800
		8000


		41800
		-1800
		8000


		41800
		-1800
		8000

Answer :

Paul services Trial Balance As At 30 June 2016
Account No	Account Name	Debit	Credit

101	Cash at Bank	299000.00
105	Accounts Receivable	99670.00
115	Supplies	3990.00
120	Prepaid Insurance	7980.00
135	Office Furniture	99800.00
137	Acc. Depreciation. - Furniture		0.00
140	Office Equipment	199600.00
141	Acc. Depreciation - Equipment		0.00
145	Store Equipment	299400.00
146	Acc. Depreciation - Equipment		0.00
170	Automobile	399200.00
171	Acc. Depreciation - Automobile		0.00
201	Accounts Payable		199340.00
201	Interest Payable		299010.00
201	Unearned revenue		49900.00
201	Loan Payable		19960.00
201	Mortgage Payable		399200.00
201	Paul's Capital		81559.00
201	Paul's Drawings	399.00
201	Revenue		399000.00
201	Advertising Expense	6000.00
201	Automobile Expense	5775.00
201	Depreciation Expense - Furniture	0.00
201	Depreciation Expense - Equipment	0.00
201	Depreciation Expense - Store Equipment	0.00
201	Depreciation Expense - Automobile	0.00
201	Insurance Expense	5000.00
201	Maintenance Expense	21000.00
201	Miscellaneous Expense	1155.00
201	Rent Expense	0.00
201	Supplies Expense	0.00
201	Utilities Expense	0.00
201	Interest Expense	0.00
		1447969.00	1447969.00

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 Balance		Adjustments		Adjusted Trial Balance
Account No	Account Name	Debit	Credit	Debit	Credit	Debit	Credit

101	Cash at Bank	299000.00				299000.00
105	Accounts Receivable	99670.00				99670.00
115	Supplies	3990.00			2992.50	997.50
120	Prepaid Insurance	7980.00			6384.00	1596.00
135	Office Furniture	99800.00				99800.00
137	Acc. Depreciation. - Furniture		0.00		19960.00		19960.00
140	Office Equipment	199600.00				199600.00
141	Acc. Depreciation - Equipment		0.00		39920.00		39920.00
145	Store Equipment	299400.00				299400.00
146	Acc. Depreciation - Equipment		0.00		29940.00		29940.00
170	Automobile	399200.00				399200.00
171	Acc. Depreciation - Automobile		0.00		39920.00		39920.00
201	Accounts Payable		199340.00				199340.00
201	Interest Payable		299010.00		39920.00		338930.00
201	Unearned revenue		49900.00	24950.00			24950.00
201	Loan Payable		19960.00				19960.00
201	Mortgage Payable		399200.00				399200.00
201	Paul's Capital		81559.00				81559.00
201	Paul's Drawings	399.00				399.00
201	Revenue		399000.00		24950.00		423950.00
201	Advertising Expense	6000.00				6000.00
201	Automobile Expense	5775.00				5775.00
201	Depreciation Expense - Furniture	0.00		19960.00		19960.00
201	Depreciation Expense - Equipment	0.00		39920.00		39920.00
201	Depreciation Expense - Store Equipment	0.00		29940.00		29940.00
201	Depreciation Expense - Automobile	0.00		39920.00		39920.00
201	Insurance Expense	5000.00		6384.00		11384.00
201	Maintenance Expense	21000.00				21000.00
201	Miscellaneous Expense	1155.00				1155.00
201	Rent Expense	0.00				0.00
201	Supplies Expense	0.00		2992.50		2992.50
201	Utilities Expense	0.00				0.00
201	Interest Expense	0.00		39920.00		39920.00
	Reconciliation	1447969.00	1447969.00	203986.50	203986.50	1617629.00	1617629.00

4. Income Statement from the worksheet

Paul Services
Income Statement for the Year Ending 30 June 2016

Revenue		423950.00
Less: Expenses
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
Rent Expense	0.00
Supplies Expense	2992.50
Utilities Expense	0.00
Interest Expense	39920.00
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	Revenue		423,950.00
	CR	Income Acc		423,950.00

Close Expenses Accounts

DR	Income Account		217966.50
	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 Account		205,983.50
	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 year		81559.00
Less: Drawings		-399.00
		81160.00
Add: Income During the Year		205983.50
Paul's Capital as at 30 June 2018		287143.50

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 Furniture	99800.00
Less: Acc. Depreciation.	-19960.00
Net office Furniture		79840.00
Office Equipment	199600.00
Less: Acc. Depreciation.	-39920.00
Net office Equipment		159680.00
Store Equipment	299400.00
Less: Acc. Depreciation.	-29940.00
Net Store Equipment		269460.00
Automobile	399200.00
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).

Tags:paul services trial balance 30 june 2016 journal entries equity and balance sheet

Paul Services : Trial Balance

Question :

Answer :

Save Time & Improve Grades