Essays on Practice Questions Math Problem

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(Being, interest expense debited and the interest still due for payment credited to interest payable account)i. The partial work sheet is not complete and has certain errors. To improve the accuracy and to ensure proper presentation of financial statements the adjustments needs to be passed which will result in creating the Post Closing Trial Balance. This trial balance will be complete in all aspect and will have the correct financial information relating to each account. This will there by facilitate in the preparation of financial statements which holds prime importance for the investors and persons associated with the company. Trail Balance of George’s Advertising AgencyAs at 30th June 2009AccountsDrCrCash12500 Accounts Receivable18000 Interest Receivable1500 Art Supplies5000 Prepaid Insurance3350 Printing Equipment60000 Accumulated Depreciation 35000Accounts Payable 500Interest Payable 850Bank Loan 9250Unearned Revenue 8400Salary Payable  Capital- George Martin 25500Drawings12000 Advertising Revenues 58700Interest Revenue  Salaries Expense10000 Insurance Expense  Interest Expense1450 Depreciation Expense7000 Art Supplies Expense3400 Rent Expense4000  138200138200It is important that the work sheet is worked upon and completed in all respect as it will result in providing the wrong balances for the concerned ledger account.

This could result in the financial statements depicting a wrong picture for the organisation which might lead towards misguiding the investors.

This will also result in either over or under estimating the profits thereby not reflecting the correct financial stature. i. Melissa needs to prepare the profit and loss statement and the final balance sheet to know the actual position of the enterprise. ii. A classified balance sheet is where the “assets and liabilities are divided under the head current and non-current or long term liabilities. iii. Trading & Profit and Loss StatementOf George Advertising AgencyFor the year ended June 30, 2009DrCrParticularsAmountParticularsAmountTo Salary expenses10000By Advertising Revenue58700To Insurance Expense1450To Interest Expense7000To Depreciation3400To Art Supplies Expense4000To Net Profit328505870058700Balance sheet of George Advertising AgencyAs at 30th June, 2009ASSETS   Current Assets   Cash A/c 12500 Accounts Receivable 18000 Interest Receivable 1500 Prepaid Insurance 3350 Total Current Assets  35350Capital Assets or Fixed assets   Printing Equipment60000  Less: Accumulated Depreciation3500025000 Art Supplies 5000 Total Capital Assets  30000Total Assets  65350LIABILITIES & EQUITY   Current Liabilities   Account Payable 500 Interest Payable 850 Unearned Revenue 8400 Total Current Liabilities  9750Long Term Liabilities   Bank Loan 9250 Total Long Term Liabilities  9250Owners Equity   Capital Assets or Fixed assets25500  Add: Net Profit32850  Less: Drawings12000     46350Total Liabilities  65350i.

Reversing entries are done so that revenues and expenses are not counted twice which will make the accounting system efficient and allow the balances to be correctly reflected. For exampleSuppose, a retailer takes the help from a company from March 15 to March 31 and the bill for the same is $10,000.

The company will bill the retailer on April 10 and the retailer agrees to pay the bill by April 15. The accounting year ends on 31st March. The retailer on March 3 will make the following entryService ExpenseDr 10,000Accrued Expense PayableCr10,000On 1st April the retailer will pass the reverse entry asAccrued Expense Payable Dr 10,000Service ExpenseCr10,000This is the reversing entry that needs to be passed and when the amount is received by the service company then the retailer will debit the invoice which will result in the service account having a zero balance thereby ensuring that revenues and expenses are not counted twice. ii.

Reversing entries are passed on the “first day of the accounting period so that the adjusting entries are corrected”. The entries which would be reversed are related to the interest revenue and interest receivable and advertising revenue and unearned revenue. Reversing both this entries will result in ensuring that the adjustments are made and the revenues and expenses are not neither under estimated nor over estimated. The reversing entries areUnearned RevenueDr1400To Advertising RevenueCr1400(Being, reversing entry for unearned revenue passed)Interest ReceivableDr500To Interest RevenueCr500(Being, reversing entry for interest receivable passed)

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