The adjusted account balances for Flying Carpet Inc. at December 31, 2016, conta

Question

The adjusted account balances for Flying Carpet Inc. at December 31, 2016, contains the following accounts Accounts Payable 1500 Prepaid Insurance Accounts Receivable8,000 Service Revenue Cash20,000 Supplies Saeed, Capital Salaries Expense Notes Payable S 1,500 32,000 3,000 21,000 14,200 6,000 Unearned Revenue Saeed, Drawing Equipments Accumulated Depreciation Retained earnings 800 2,000 S 21,000 1,000 2000 Required: 1. Prepare the closing entries 2. Prepare a classified statement of financial position

Explanation / Answer

Flying Carpet Inc - December 31, 2006 Note: Closing entries will be passed to close the Profit and loss items and transfer them to the Profit and loss account. Hence they will be used to only expenses and revenues. Thus Balance sheet items are not closed. Closing Entries: Particulars Debit Credit Service Revenue a/c Dr $32,000    To Profit and Loss a/c $32,000 (Revenue account being transferred to Profit and loss and hence closed) Profit and Loss a/c Dr $21,000    To Salaries Expenses a/c $21,000 (Salaries expenses account being transferred to Profit and loss and hence closed) Classified Statement of Financial Position: A classified balance sheet presents information about an entity's assets, liabilities, and shareholders' equity that is aggregated (or "classified") into subcategories of accounts. The information on the statement of financial position can be used for a number of financial analyses, such as comparing debt to equity or comparing current assets to current liabilities. It is one of the financial statements, and so is commonly presented alongside the income statement and statement of cash flows. Classified Statement of Financial Position: Particulars Amount (in $) Amount (in $) Liabilities Share Cpaital Saeed Capital              14,200 Less: Drawings              (2,000)                12,200 Reserves and Surplus Profit and Loss a/c (Revenue - Expense= $32000 - $21000)              11,000 Retained Earnings                2,000                13,000 Other Current Liabilities Accounts Payable                1,500 Notes Payable                6,000                 7,500 Total              32,700 Assets Fixed Assets - Equipment              21,000 Less: Accumulated Depreciation              (1,000)                20,000 Current Assets Prepaid Insurance                1,500 Accounts Receivable                8,000 Cash              20,000 Supplies (Stock)                3,000 Unearned Revenue                  800                33,300 Total              53,300

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