Tanner Kerekes had been operating his law practice in Mississauga under the name Tanner Kerekes, Lawyer. The following business transactions took place during the month of May 2019. Identify the accounting characteristic, assumption, or principle that would be applicable to each of the transactions and discuss the effects it would have on the financial statements of Tanner Kerekes, Lawyer. May 1 Kerekes deposited $30,000 cash into the business bank account. May 3 Kerekes completed legal work for a home builder. He charged the builder $5,000, not the $6,000 the work was worth, in order to earn more business from the builder. May 5 The business bought furniture from Ajax Furniture for $8,000, paying $2,000 cash and promising to pay $1,000 per month at the beginning of each month starting June 1, , for six months. Kerekes would like to expense the entire amount to reduce net income for tax reasons. May 10 The business signed a lease to rent additional space at a cost of $2,000 per month. Kerekes will occupy the premises effective June 1, . May 18 Determining that the business would need more cash in June, Kerekes went to the bank and borrowed $20,000 on a personal loan and transferred the money to the company. May 25 Kerekes purchased a painting for his home from one of his clients. He paid for the $3,000 purchase with his personal credit card. May 28 Kerekes withdrew $5,000 from the business. He used $2,000 of the money to repay a portion of the loan arranged on May 18. May 31 The business did legal work with a value of $10,000 for Apex Computers Ltd. Apex paid for the work by giving the company computer equipment with a selling price of $12,000.
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.
Tanner Kerekes had been operating his law practice in Mississauga under the name Tanner Kerekes, Lawyer. The following business transactions took place during the month of May 2019. Identify the accounting characteristic, assumption, or principle that would be applicable to each of the transactions and discuss the effects it would have on the financial statements of Tanner Kerekes, Lawyer. May 1 Kerekes deposited $30,000 cash into the business bank account. May 3 Kerekes completed legal work for a home builder. He charged the builder $5,000, not the $6,000 the work was worth, in order to earn more business from the builder. May 5 The business bought furniture from Ajax Furniture for $8,000, paying $2,000 cash and promising to pay $1,000 per month at the beginning of each month starting June 1, , for six months. Kerekes would like to expense the entire amount to reduce net income for tax reasons. May 10 The business signed a lease to rent additional space at a cost of $2,000 per month. Kerekes will occupy the premises effective June 1, . May 18 Determining that the business would need more cash in June, Kerekes went to the bank and borrowed $20,000 on a personal loan and transferred the money to the company. May 25 Kerekes purchased a painting for his home from one of his clients. He paid for the $3,000 purchase with his personal credit card. May 28 Kerekes withdrew $5,000 from the business. He used $2,000 of the money to repay a portion of the loan arranged on May 18. May 31 The business did legal work with a value of $10,000 for Apex Computers Ltd. Apex paid for the work by giving the company computer equipment with a selling price of $12,000.
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