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Andhra Pradesh
Name : N.sambaiah
Designation : Head of Section
Branch : DCCP
Instititute : Suvr & SR Govt.Polytechnic
for Women,Ethamukkala.
Year : I year
Subject : Accountancy –I
Subject code : CCP-102
Topic : Final Accounts
Duration : 50 minutes
Sub-topic :Journal entries required for
preparation of Trading and Profit
and Loss account
Teaching a aids : PPT’S
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Objectives of the lesson
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Recap
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Adjustments in Final accounts
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Adjustments in final accounts.. contd..
There are some incomes earned during the trading period but not
received. Sometimes, incomes are received in advance but not
earned in the trading period.
Certain debts may become irrecoverable, which are to be written
off. And provision is to be made for bad and doubtful debts.
Depreciation is to be made on fixed assets.
The above are some of the cases, among many, which require
adjustments.
Before preparing final accounts, the adjustments are to be made
to find out exact net profit/loss. journal entries required for
making adjustments are called adjustment entries.
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Common items that require adjustments
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Adjustments— Outstanding expenses
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Adjustments - Outstanding expenses.
Contd..
In the Profit and Loss account, it is shown as:
To Salaries 10000
Add: outstanding 5000
-------- 15000
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Adjustments - Outstanding expenses.
Contd..
In the Balance Sheet, it is shown as below.
Balance sheet
Liabilities Assets
Outstanding expenses
Salaries 5,000
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Adjustments – 2.Prepaid expenses
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Adjustments – 2.Prepaid expenses ..(contd).
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Adjustments – 2.Prepaid expenses ..(contd)
In the Profit and Loss account, it is shown as
Profit and loss account
Dr Cr
To Insurance 4000
Less:prepaid 1000
-------- 3000
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Adjustments – 2.Prepaid expenses ..(contd)
In the Balance Sheet, it is shown as
Balance Sheet as on…..
Liabilities Assets
Prepaid expenses
Insurance 1000
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Adjustments –3. Income earned but not
received
Also called outstanding income.
This income is earned during the accounting year but not entered
into accounts due to non-receipt of amount
This income belongs to the accounting year and hence it credited
to Profit and Loss account.
Adjustment entry :
Income earned but not received account Dr xxx
To Name of the income account xxx
(Being adjustment entry for the income earned but not
received)
-------------------------------------------------------------------------------
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Adjustments – 3.Income earned but not
received.. (contd)
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Adjustments – 3.Income earned but not
received.. (contd)
In the Profit and Loss account, it is shown as
Profit and loss account
Dr Cr
By Interest 4000
Add: earned
but not received 2000 6000
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Adjustments – 3. Income earned but not
received.. (contd)
In the Balance Sheet, it is shown as
Balance Sheet as on
Liabilities Assets
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Adjustments –4. Income received in advance
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Adjustments –4. Income received in
advance.. (contd)
advance)
--------------------------------------------------------
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Adjustments –4. Income received in
advance.. contd
In the Profit and Loss account, it is shown as
Profit and loss account
Dr Cr
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Adjustments –4. Income received in
advance.. contd
In the Balance Sheet, it is shown as
Balance Sheet as on
Liabilities assets
Income received in
advance
Rent 500
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Summary
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Quiz
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Quiz
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Assignment
Pass adjusting entries for the following
a) Wages due but not paid Rs10,000
b) Insurance premium (for next accounting year) paid
in current year Rs 2,000
c) Rent received in advance Rs 6,000
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