Adjustments of Final Accounts

Adjustments of Final accounts - full detail in table form >> SEPTEMBER 21, 2008

There are many adjustment because earlier we have not passed any journal entry , so at the time of making final account we have to adjust them .

 Name of items

Adjustment entry

1. Closing stock

Closing stock account dr. xxx To trading account xxx Expenses account dr. xxx To outstanding exp. xxx

2. outstanding expenses or expenses  payable or expenses due  but not paid

3. advance expenses

4. income receivable

5. income received in advance

6 Goods use

Advance expenses a/c dr. xxx To expenses account xxx Outstanding income account dr. xxx To income account xxx Income account dr. xxx To advance income account xxx Drawing

Effect on trading and profit and loss account Closing stock will write in the credit side of trading account Outstanding expenses will add in expenses . if it is direct it will go to trading

Effect on balance sheet It will show as asset in the final account

It will be the current liability so it will go to the liability side of balance sheet.

account’s debit

side , if it is indirect nature then it will go to the debit side of  profit and loss account It will deduct from respective expenses paid .

It will be the current asset so it will go to assets side of  balance sheet

It will add in the income and go to credit side of  profit and loss account

It will show as asset in the assets side of  balance sheet

It will deduct from the income received

It will shown as liability in the liabilities side of  balance sheet

It will deduct

It will deduct from

for personal use

7. Destroyed of goods

account dr. xxx To purchase account

loss by fire or accident account Dr. xxx To trading If there is no insurance It will also go to profit and loss account Profit and loss account dr. xxx To loss by fire / accident 8. Depreciation Depreciation account dr. xxx To respective asset account xxxx 9. provisional If you have for doubtful make any debts  provision for doubt ful debts the its  journal entry will passed Provision for doubtful debt account dr. xxx To Bad debts account xxx ( New bad debts which is not shown in trial  balance will transfer to  provision for

from purchase in the debit side of trading account = purchase –  drawing in goods It will shown in credit side of trading account And also in profit

capital in the liabilities side of  balance sheet =capital- drawing in goods It will not go to  balance sheet

and loss account’s

debit side

It will go to the debit side of profit and loss account

It will deduct from fixed asset . Because it decrease the value of asset =fixed asset depreciation  Net value of Deduct from debtor  provision for = debtor –  new bad doubtful debt debts –  this year account transfer to  provision or closing  profit and loss  balance of provision account’s debit for bad debts side =total bad debt + closing balance or  provision of doubtful debt or this year provision - opening balance of provision for doubtful debts

10. Commission to manager

doubtful debt account ) Commission It will shown in account dr. the debit side of xxx  profit and loss To account as o/s outstanding commission to commission manager If it charge on the amount after charging such commission then we will calculate = profit before commission X Rate/ 100+rate

It will shown as liability