The Bible in Luke 14:28 says, “Suppose one of you wants to build a tower. Won't...

The Bible in Luke 14:28 says, “Suppose one of you wants to build a tower. Won't you first sit down and estimate the cost to see if you have enough money to complete it?” How do you think this verse might apply to this chapter on closing entries? Where do you see the connection between doing closing entries and whether a company should proceed with a business venture?

Solutions

Expert Solution

Closing Entries are year end or month end or any period end(might be a quarter or half year end) entries to arrive at computing closing balances of acounting ledgers, some of which are carried forward in case of assets and liabilities as Opening balances of Subsequent periods

They are necessary to arrive at Actual earnings(Net Profit) and also Retained Earnings asertain the Financial position of the company.

It is done to draft a Trial balance which is the basis for preparation of financial statements

Examples of showing the effect of Closing entries:

Closing Cash book by arriving at difference of Cash Income and expenses will convey the Actual cash balance available which is necessary to plan for the future.It shows the Liquidity position of the company for entering into business Venture.It forms a deciding factor

Closing entries for Accounts receivable by recording all sales on account and crediting all cash received for the same and the balance( difference between the two) gives actual sum due at the end of the period which can be used to plan estimated receivables(assets) .This too helps in estimating the Short term Liquidity position to enter into Business Venture

Arriving at Net Income by recording all expenses and income on accrual basis(by passing period end closing (Due) entries) will help in arriving Retained Earnings(Surplus Funds at disposable of the company)

With the help of Retained Earnings and estimating Future cash flows one can frame a Capital Budget to decide if it is feasible to proceed with Business Venture.

Passing Closing entries will help in deriving the actual financial position which will help in deciding the feasibility(whether the company can actually enter into Business Venture)

(Financial position is arrived from Closing balances of Assets and Liabilities- Balance sheet)

Through Financial Position one can judge the company's operating effiiency and also can calculate Various Financial Ratios like Debt equity,Current ratio,Assets Turnover ratio etc to assist in deciding whether to proceed with Business Venture or not

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

14. What is the “intra-racial network effect?” Select one: a. It says that there is no...

14. What is the “intra-racial network effect?” Select one: a. It says that there is no difference in STDs across different racial groups. b. It discusses how health is improved by cross-cultural alliances and relationships. c. The IRNE is a theory, which says that Hispanics are more likely to have an STD due to their residence in enclaves. d. It asserts that because of cross-cultural sex partners, STDs are spreading. e. It suggests that segregation contributes to the high rate...

14. Extra Credit: Cayley’s Theorem is an important one in advanced algebra. It says that “Every...

14. Extra Credit: Cayley’s Theorem is an important one in advanced algebra. It says that “Every algebraic group is isomorphic to some permutation group.” Demonstrate this to be true by finding a permutation group (Sn, ∘ ) that is isomorphic to (ℤ3, +) for some n.

Suppose you build bird houses. One day, you double the time you spend building and double...

Suppose you build bird houses. One day, you double the time you spend building and double the wood, nails, paint, and all the other inputs in order to build twice as many bird houses. What kind of production function is this? Question 6 options: increasing returns to scale constant returns to scale decreasing returns to scale zero returns to scale Question 7 (1 point) If a country's saving rate increases, what happens in the long run? Question 7 options: Income...

Greg wants to build a rectangular enclosure for his animals. One side of the pen will...

Greg wants to build a rectangular enclosure for his animals. One side of the pen will be against the barn, so he needs no fence on that side. The other three sides will be enclosed with wire fencing. If Greg has 650 feet of fencing, you can find the dimensions that maximize the area of the enclosure. a) Let WW be the width of the enclosure (perpendicular to the barn) and let LL be the length of the enclosure (parallel...

14. You want to buy your first home and the bank officer says that the monthly...

14. You want to buy your first home and the bank officer says that the monthly mortgage payment can be up to a maximum of 40% of your monthly household gross income (monthly). Your household gross income is $85,000/year. According to this bank officer, what is your maximum monthly mortgage payment from this bank? 17. You purchased your condo for $220,000 5 years ago. The current market value is $300,000. You still owe $165,000 on the mortgage. If you can...

choose one of Paul's letters from your Bible and read its introduction. If you were to...

choose one of Paul's letters from your Bible and read its introduction. If you were to introduce Paul's work and this letter to a student or colleague, what would you say/write? How would you characterize the importance of Paul in his context and in the location where the letter was written, and in what ways is this letter of importance? In other words, think about Author, Audience, Opponents, and Occasion.

Suppose New York wants to build a new facility to replace Madison Square Garden. Assume that...

Suppose New York wants to build a new facility to replace Madison Square Garden. Assume that the cost of building a new arena in midtown Manhattan is $2.5 billion and that all the costs occur right away. Also assume that New York will receive annual benefits of $110 million for the next 25 years, after which the new arena becomes worthless. Does it make financial sense to build the new facility if interest rates are 6 percent? At what interest...

Suppose you’re a doctor and you read a headline in a newspaper that says a particular...

Suppose you’re a doctor and you read a headline in a newspaper that says a particular dietary supplement decreases blood pressure with p = 0.01. The supplement is generally safe but sometimes causes unpleasant side effects. Assuming this is all you know, answer the questions below. a) What does this headline mean? Incorporate the definition of p-value into your answer. b) Should you recommend the supplement to patients with high blood pressure? Why or why not? Give at least two...

Suppose the following weights, in pounds, of 28 one-year-old Labradors are collected:

Suppose the following weights, in pounds, of 28 one-year-old Labradors are collected: 65.4 70.2 60.5 53.2 72.4 62.8 66.9 65.7 58.7 80.3 70.5 72.0 68.4 92.5 60.8 69.8 72. 7 68.5 78.9 82. 7 56.3 67.2 62.6 48.5 80.4 88.0 78.5 76.0 1. To the nearest thousandth, determine the mean of this sample, and to the nearest hundred-thousandth, determine the deviation 2. Determine and properly label the five-number summary of the data, and use it to find the IQR 3....

A private kindergarten, Happy Learning, wants to build a database to manage their operations. You were...

A private kindergarten, Happy Learning, wants to build a database to manage their operations. You were assigned to create an initial design based on the following customer description of their operations. There are 3 age levels in the kindergarten (turtles, foxes and monkeys). At each level there 3 classes (red, blue and green). For a class we keep a code based on the initial of group color and level (e.g. RT for red turtles, GF for green foxes). Each class...

Subjects