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Debit side of Trading and Profit Loss ac by way of addition to expenses, Debit side of Trading and Profit Loss ac by way of deduction from Expenses, Income Received in Advance (income received but not earned in the financial year)
Final Accounts - Adjustments Adjustment item 1st Effect 2nd Effect Closing Stock Credit side of Trading Assets side of a/c Balance Sheet Outstanding Expenses Debit side of Trading and Profit & Loss a/c Liabilities side of by way of addition to Balance Sheet expenses Prepaid Expenses Debit side of Trading and Profit & Loss a/c Assets side of by way of deduction Balance Sheet from Expenses Contd… Adjustment item Accrued Income (income earned but not received) 1st Effect 2nd Effect Credit side of profit & loss a/c by way of addition to Assets side of Balance Sheet income Income Received in Advance (income Credit side of Profit & loss Liabilities side of the received but not a/c by way of deduction Balance Sheet earned in the from the income financial year) Depreciation Assets side of Balance Sheet Debit side of Profit & Loss by way of deduction from a/c the value of concerned asset Bad Debts Assets of Balance Sheet by Debit side of Profit & Loss way of deduction from a/c sundry debtors Contd… Adjustment item 1st Effect 2nd Effect Interest on Capital Liabilities side of the Debit side of Profit & Balance Sheet by way of Loss a/c addition to the capital Interest on Drawings Liabilities side of Balance Credit side of Profit & Sheet by way of addition Loss a/c to the drawings which are deducted from the capital Debit side of Profit & Loss a/c or by way of addition to Bad Debts Provision for Doubtful (Old provision for Debts doubtful debts at the beginning of the year will be deducted) Assets side of Balance Sheet by way of deduction from sundry Debtors (After deduction of further bad debts, if any) Contd… Adjustment item Provision for Discount on Debtors Reserve for Discount on Creditors 1st Effect Debit side of Profit & Loss a/c Credit side of Profit & Loss a/c Deferred Revenue Debit side of Profit & Expenditure Loss a/c 2nd Effect Deduction from Debtors (after deduction of further bad debts and provision for doubtful debts) on the assets side of the Balance Sheet Liabilities side of the Balance Sheet by way of deduction from creditors Assets side of Balance Sheet by way of deduction from capitalized expenditure Contd… Adjustment item 1st Effect 2nd Effect Loss of Stock by Fire If the stock is fully Credit side insured Account of Trading Assets side of Balance Sheet Loss of stock by fire is It will be shown on the credit shown on assets side of side of Trading Account with Balance Sheet with the If the stock is partly the value of stock and shown amount which is to be insured on the debit side of Profit & realized from the Loss a/c for the part of the insurance co i.e., that part stock which is not insured of the loss which is insured If the stock is not Credit side of Trading a/c insured Debit side of Profit & Loss a/c Contd… Adjustment item 1st Effect 2nd Effect Reserve Fund Debit side of Profit & loss a/c along with net profit in the inner column Liabilities side of the Balance Sheet If reserve fund is already there, it will be shown by addition to the existing reserve fund on the liabilities side of the Balance Sheet Goods distributed as Free Samples Debit side of Trading a/c by way of deducted from the purchases Debit side of Profit and Loss a/c as Advertisement expenses Contd… Adjustment item 1st Effect 2nd Effect Managers Commission Debit side of Profit & Loss a/c Liabilities side of Balance Sheet Goods on sale or Approval Basis Credit side of Trading a/c by way of deduction from the sales at sale price and added to the closing stock at cost price Assets side as a deduction from sundry debtors sale price) and stock at cost on the Assets side of the Balance Sheet