FINAL ACCOUNTS WITH ADJUSTMENTS

Items Adjustment Entry Adjustment

1) Closing Stock
A. in trial balance
----------------- a) Asset side of Balance
B. As additional Sheet
information
Closing stock a/c Dr.
To Trading a/c b) (i) Cr. Side of trading a/c
b) (ii) Asset side of Balance Sheet

2) Outstanding
Expenses
A. in trial balance ----------------- a) a)Liability side of Balance sheet

B. As additional Expenses a/c Dr. b) (i) Dr. side of trading & P&L a/c
information To Outstanding Exp as an addition to expense a/c.
b) (ii) Liabilities side of B/S under
the heading Current Liabilities.
3) Prepaid a) Asset side of Balance
Expenses Sheet
A. in trial balance -----------------
b) (i) Dr. side of trading & P&L a/c
B. As additional Prepaid expenses a/c Dr. as a deduction to expense a/c.
information To Expenses a/c b) (ii) Assets side of B/S under the
heading Current Assets .
4) Accrued
Income a) Asset side of Balance
A. in trial balance ----------------- Sheet

B. As additional Accrued income a/c Dr. b) (i) Cr. side of trading & P&L a/c
information To Income a/c as an addition to income a/c
b) (ii) Assets side of B/S under the
heading Current Assets
5) Income
received in
advance a) Liability side of Balance sheet
A. in trial balance -----------------

B. As additional Income a/c Dr. b) (i) Cr. side of trading & P&L a/c
information To Income received in as a deduction to income a/c.
advance b) (ii) Liabilities side of B/S under
the heading Current Liabilities.

6) Accidental Loss by fire a/c a) i) Total amount of loss is debited

Losses Dr. to trading a/c as deduction from
(eg. Loss by fire ) To Purchase a/c purchases.
(For goods lost by fire
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A. loss of goods adjusted to purchases)
a) ii) The actual amount of loss is
P&L a/c debited to P&L a/c.
Dr.
To Loss by fire a/c
(With the amount not admitted a) iii) The Insurance Co. a/c will be
by Insurance Co.) shown in Balance Sheet under the
heading Current Assets by the
Insurance Co. a/c amount admitted but not paid.
Dr.
To Loss by fire a/c
(With the amount of claim
admitted by Insurance Co.)
7) Bad debts (a) Only on Dr. side of P&L a/c.
A. in trial balance ---------------
Cash a/c Dr.
B. as additional BadBad
To debts
debtsa/c
recovered Dr.
b) (i) debited to P&L a/c
information To Debtors a/c b) (ii) deducted from debtors in
B/S
8) Provision for Dr PBD a/c (1) debited to P&L a/c “ To PBD
bad & doubtful To bad debts (As per By balancea/c”
b/d
debts TB) (2) credited to P&L a/c “ By PBD
To F. bad debts (Add. By P&L a/ca/c”
Info.) (4) (b/f)(1) (3) & (4) will be deducted from the
To P&L (b/f) (2) debtors in B/S
To Balance c/d (3)
{(Debtors as per TB-
further bad debts)* rate
of provision}
Cr.
9) bad debts 1) Treated as income & Cr. To P&L
recovered a/c.
Bad debts recovered a/c Dr.
2) Cash balance to be increased by
that amount.
To P&L a/c
(if given as additional
information

10) Provision for By balance (1) ( Debtors as per TB –

discount on To discount b/d further bad debts – closing
(TB)
debtors balance of PBD) * rate of
To P&L By P&L a/c
provision
To balance c/d
(1)

Dr. PDD Cr

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11) Interest on 1) is an expense & Should be debited to
capital Interest on capital a/c Dr P&La/c.
To capital a/c
2) added to capital in B/S.
3) If additional capital is introduced- Interest
on capital to be calculated from the date of
introduction
12) Interest on 1) Credited to P&L a/c
Drawings 2) Deducted from capital a/c.
Interest on drawings a/c Dr.
To P&L a/c
3) In absence of any information
Charge interest for 6 months on full
amount.
13) Interest on Interest a/c Dr. 1) debited to P&L a/c
Loan due & not To Interest outstanding a/c
(or the lender’s personal a/c)
paid 2) Added to Loan amount in B/S.
14) Goods sent 1) The amount is not included in sales;
on approval hence, sales value of such goods is
Sales a/c Dr
To Debtors a/c
deducted both from sales & from
debtors.
2) The cost of such items has been
deducted from the stock:
hence, it should again be added to the
stock.
15) Depreciation a) Shown in B/S as deduction from
A. in trial balance Fixed Asset.
-------------

b)(i) Debited to P&L a/c

B. as additional Depreciation a/c Dr. b)(ii) Deducted from Fixed asset in
information To Fixed Asset a/c B/S.
16) goods in 1) Shown on the assets side.
transit
Goods-in-transit a/c (1) Dr.
(purchased) To seller’s a/c(2)
2) Shown on the Liability side

17) Commission a) before charging such commission. 1) debited to P&L a/c

Payable on Formulae;
a) ( Net Profit before charging the
Profits commission)* Rate/100
2) “Commission payable
a/c” shown as liability in
b) after charging such Commission. B/S
b) ( Net Profit before charging the
commission)* Rate / (100+ Rate)
18)Drawing of 1) Deducted from purchases on the
Goods by the debit side of P&L a/c.
Drawings a/c Dr
Proprietor To Purchases a/c
2)Deducted from capital or added to
drawings on Liability side of B/S.
19) Provision for Dr PDC Cr. 1) Credited to
discount on To balance b/d By discount a/c profit and loss a/c
Creditors To P&L a/c By balance 2)deducted from
BF)(1) c/d(2) creditors in the
B/S
(This provision is against the “Conservatism Concept”,
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hence it is usually avoided in practice.)