Adjustments:

1) Closing stock:
- Credit side of trading a/c
- Assets side of Balance sheet

2) Outstanding expenses:
- added to the related expenses on debit side
- liabilities side

3) Prepaid expenses:
- deducted from related expenses on debit side
- assets side

4) Depreciation:
- debit side of p/l a/c
- deduct from related assets from balance sheet

5) Accrued income:
- added to the related income on the credit side of p/l a/c
- assets side

6) Advance income:
- deduct from related income on the credit side of p/l a/c
- liabilities side

7) Interest on loan:
- debit side of p/l a/c
- liabilities side

8) Interest on capital:
- debit side of p/l a/c
- liabilities side (addition to the capital)
9) Goods withdrawn by owner:
- deducted from purchase
- deduct from capital account

Example: 1 The following information are provided to you:

Opening stock Rs.12,500 Sales Rs. 53,380
Purchase Rs. 38,800 Purchase return Rs.200
Closing stock Rs. 12,300 Wages Rs.1,250
Carriage Rs.750 Gas & water Rs.400

Required: Trading a/c

Trading account of …….

As on …………..
Dr. Cr.
Particulars Amount Particulars Amount
To opening stock 12,500 By Sales 53,380
To Purchase 38800 By closing stock 12,300
Less: Purchase return 200 38,600
To carriage 750
To wages 1250
To gas & water 400
To gross profit c/d 12,180
65,680 65,680

Profit and Loss account

Particulars Amount Particulars Amount
By gross profit b/d 12,180