7/31/2019 adj.FA.nil

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Welcome To all of You..

NILIMA DAS

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Final Account Adjustment.

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Adjustment for Depreciation

Case I If depreciation is givenwithin the trial balance:

No posting in Balance sheet itonly appears in P& L a/c.

Case II If depreciation is givenoutside the trial balance:

It appears in P&L a/c and as adeduction in Balance sheet.

7/31/2019 adj.FA.nil

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Adjustment for Prepaidexpenses

In P&L a/c As a deductionfrom that expenses in P&L a/cdebit side.

In Balance Sheet- It appears onthe asset side of the balancesheet.

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Adjustment for OutstandingExpenses

In P&L a/c As an addition tothat expenses in P&L a/c debitside.

In Balance Sheet- It appears onthe liability side of the balancesheet.

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Accrued Income:

Meaning: It refers to that income which

has been earned but not receivedduring the current accounting period.

In P&L a/c

As an addition to the respectiveincome in P&L a/c credit side.

In Balance Sheet- It appears on the Assetside of the balance sheet.

7/31/2019 adj.FA.nil

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Un Accrued Income(income received in advance)

Meaning: It refers to that income which hasbeen received but not earned during thecurrent accounting period.

In P&L a/c As a deduction from thatincome in P&L a/c credit side.

In Balance Sheet- It appears on the liabilityside of the balance sheet.

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Adjustment

Interest on Drawings

Interest on Capital

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Interest on Capital

Meaning: As per business entity conceptsince business and business man is differentbusiness man charges interest on capitalinvested from the business

In P&L a/c It is shown in P&L a/c

debit side as an indirectexpenses.

In Balance Sheet- It appears onthe balance sheet as an additionto capital.

7/31/2019 adj.FA.nil

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Interest on Drawings

Meaning: As per business entity conceptsince business and business man is differentbusiness charges interest on drawings from thebusiness man

In P&L a/c

It is shown in P&L a/ccredit side as an indirect income.

In Balance Sheet- It appears onthe balance sheet as anb additionto Drawings.

7/31/2019 adj.FA.nil

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Provision for Doubtful Debt

CASE I When no provision fordoubtful debt is in trial balance.

Adjustment:

In P&L A/c-provision for doubtful debt is calculatedon Debtor given in trial balance and shown as anaddition with earlier bad debt in P&L A/C debit side.

In Balance Sheet- It is shown in balance sheetasset side as a deduction from debtors.

7/31/2019 adj.FA.nil

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Continue..

CASE II When provision for

doubtful debt is in trial balance.Adjustment:

In P&L A/c- New provision for doubtful debt iscalculated on Debtor given in trial balance and

shown in P&L A/C debit side as follows

To Bad Debt *****

Add: New Provision

Less: Old provision ( Trial balance figure)

In Balance Sheet- It is shown in balance sheetasset side as a deduction from debtors.

7/31/2019 adj.FA.nil

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Provision for Doubtful Debt

Example:Following items were taken out of trial

balance of a company on 31st dec. 1992:

Debtors Rs.30,000Provision for Bad Debt Rs.1500

Bad Debt Rs.600

Provision for bad debt is to be maintained at

5%.Also provide discount on debtors at2%.

7/31/2019 adj.FA.nil

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Solution:

Dr.

Profit & Loss A/c

Particulars Rs.

To provision for bad debt

Bad debt Rs.600Ad: New provision Rs.1500

Rs.2,100

Less: Old provision Rs.1500

To discount on debtors

600

570

7/31/2019 adj.FA.nil

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Solution:

Balance Sheet

Asset

Sundry Debtor Rs.30,000

Less: Provisionfor bad debt 1500

28500

Less: Discount

on debtor 570

27930

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Thank You..