At the end of every accounting period, it is highly likely that a company will need to make a series of period end adjustments. The depreciation of non current assets is an example of one of these. Frequently the adjustments are correcting entries, accounting for estimates or adjusting the figures to an accruals basis. Let us once again consider the statements of financial position and income for Mobius Inc as at the end of week 4.
The following information is relevant:
(i)Mobius Inc had a telephone line installed along with a broadband connection during the third week of trading. The phone company invoices quarterly in arrears and you have not yet received your first invoice. This transaction has not been recorded in your accounting records and therefore is not included within the financial statements above. You have estimated that the usage during this first period of account will cost approximately $100.
(ii)On the last day of week 4, you found a suitable location to base the business. The monthly rental cost is $1,000 and the landlord required you to pay in advance. You paid in cash.
(iii)Mobius Inc sold $20,000 of product on credit terms. The total amount owed by customers (from all transactions) at the end of the period was $4,900.
(iv)Mobius Inc bought a further $9,000 of raw materials on credit during weeks 3 and 4 of trading. Exactly $8,000 worth was converted into finished goods, of which three quarters were sold. The remainder were held as inventories at the end of the period. These were the only goods held at the end of the period as those finished goods brought forward from weeks 1 and 2 were sold during week 3. Suppliers were owed $2,000 in total at the end of the accounting period.