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Adjustments in Final Accounts
Adjustments in Final Accounts
in final accounts. However every adjustment (or additional information given after the trial balance will have at least two effects Treatment in Trading Account Closing Closing Stock Dr. Shown on credit Stock To Trading A/c side Outstanding Respective Exp Dr. Added to Expenses To Outstanding Exp respective exp Prepaid Prepaid Expenses Dr. Deducted from Expenses To Respective Exp. respective exp Accrued Accrued Income A/c Dr. Income To respective Income Unearned Respective Income Income Dr. To Unearned Income Depreciation Depreciation A/c Dr. To respective asset Interest capital on Interest on capital Dr. To Capital A/c Item of Adjustment Adjusting Entry Treatment in P & L Account Treatment in Balance Sheet
Shown on asset side Added to Shown as respective exp current liability Deducted from Shown as respective exp current asset Added to Shown as respective current assets income Deducted from Shown as respective current liability income Separate item as expense on debit side Separate item as expense on debit side Shown as separate item of income on credit side Shown as expense on debit side Deduction shown from the respective asset Shown as addition to capital on liability side Shown as deduction from capital on liability side Shown as current liability
Dr.
Manager s commission Dr. To outstanding commission Loss of Stock A/c Dr. To Trading A/c (For gross loss of stock) Insurance Co Dr. To Loss of Stock A/c (For amount to be recovered from insurance company)
Total value of abnormal loss of stock (whether recovered or not) is shown on credit side as separate item
Total value of non recoverable loss of stock is shown as expense on the debit side.
Amount due from the insurance company is shown on the assets side as current asset separate item.
Bad Debts
Provision for P&L A/c Dr. doubtful To Provision for debts doubtful debts A/c
Provision for P&L A/c Dr. discount on To Provision for debtors discount on debtors A/c
Shown on the Shown on asset debit side as side by way of expense deduction from sundry debtors Shown on debit Shown on the side as separate asset side by expense way of a deduction from debtors (net of bad debts adjustment, if any) Shown on debit Shown on the side as separate asset side by expense way of a deduction from debtors (net of adjustment of bad debts and provision for doubtful debts, respectively if any)