adjsuting entries -1

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Closing Stock

Trial Balance Debit Credit

Opening stock 10,000

Purchases 30,000Sales 40,000

--------------------------------------------------

Add Information:1) Stock at the end the accounting year is Rs.

15,000.



Closing Stock

Balance Sheet

Liabilities Amount Asset Amount

Closing Stock 15,000



Outstanding Expenses

Trial Balance

Particulars Debit Credit

Salaries Account 10,000Rent Account 10,000

Additional Info:

1) Salary for the month of December Rs. 2000 has notyet been paid.

2) Rent amounting to Rs. 1000 is still outstanding.




Profit & Loss Account

Particulars Amt Particulars Amt

To Salaries 10,000

+ Outstanding

Salaries 2000 12,000

To Rent 5,000

+Outstanding

Rent 1000 6000




Balance Sheet

Liabilities Amount Asset Amount

OutstandingSalaries 2000

Outstanding

Rent 1000




Trial Balance


Salaries 12000

Rent 6000

Outstanding Salaries 2000

Outstanding Rent 1000



Accrued Expenses

• An accounting expense recognized in the booksbefore it is paid for. Firms will typically incurperiodic expenses such as wages, interest andtaxes. Even though they are to be paid at some

future date, they are indicated on the firm'sbalance sheet from when the firm can reasonablyexpect their payment, until the time they are paid.



Accrued Expenses

• A company borrowed Rs.200,000 on

December 1. The agreement requires that the

Rs.200,000 be repaid on February 28 along

with Rs.6,000 of interest for the three monthsof December through February. As of

December 31 the company will not have an

invoice or payment for the interest that thecompany is incurring. (The reason is that all of

the interest will be due on February 28.)



Accrued Expenses

• In order for the financial statements to be

correct on the accrual basis of accounting, the

accountant needs to record an adjusting entry

dated as of December 31. The adjusting entrywill consist of a debit of Rs.2,000 to Interest

Expense (Profit and loss account) and on the

Liability side Rs.2,000.



Prepaid Expenses

• During the accounting year ending 31st

December 1998, insurance premium for the

year ending 31st March 1999 have been paid.

It means that insurance for 3months havebeen paid in advance. In order to ascertain

true P&L only expenses relating to the

accounting period should be charged to theP/L Account.



Prepaid Expenses

Trial Balance(31st Dec 1998)


Insurance 8000

Rent 4000

Additional Information:

1) Insurance Premium has been paid in advance

amounting to Rs.1000 for the next year.

2) Rent Rs. 500 has been paid for the next year.



Prepaid Expenses

Profit & Loss Account


Insurance : 8000Less -Prepaid: 1000 7000

Rent: 4000

Less prepaid : 500 3500



Prepaid Expenses

Balance Sheet

Liabilities Amt Assets Amt

Prepaid Insurance 1000Prepaid Rent 500



Outstanding Income

• Outstanding Income means which has become

due during the accounting year but which has

not so far been received by the firm.

Trial Balance


6% Loan 20,000

Interest on loan received

Up to 31st Oct 1998 1000



Outstanding Income

Profit and Loss Account(31st Dec 1998)


Interest on

Loan : 1000

Outstanding 200 1200

Balance Sheet

Liabilities Amount Assets Amount

Outstanding

interest 200



Accrued Income

• Accrued Income means Income which has been

earned by business during the accounting year

but which has not yet become due and therefore

has not been received.• Accrued Income are the assets (i.e) Current

Assets and appear in the Balance sheet on Asset

Side.• They are Added to the concerned income account

for that particular year on the credit side.



Accrued Income

• To illustrate, let’s assume that a company investedRs.100,000 on December 1 in a 6% Rs.100,000 bondthat pays Rs.3,000 of interest on each June 1 andDecember 1. On December 31, the company will have

earned one month’s interest amounting to $500(Rs.100,000 x 6% per year x 1/12 of a year, or 1/6 of the semiannual Rs.3,000). No interest will be receivedin December since it will be part of the Rs.3,000 to be

received on June 1. The Rs.500 of interest earnedduring December, but not yet received or recorded asof December 31 is known as accrued income.



Income Received in

Advance(Unearned Income)

• In order to ascertain the true profit and loss ,

it is necessary that such income is not taken

into the account.

Trial Balance (31st Dec 2000)


Rent received for 12 months

Ending 31st March 2000 1200

Interest on loan 2000



Unearned Revenue

• Additional information

1) Interest on loan has been received in advance to theextent of Rs. 500.

Profit &Loss Account

Particulars Amt Particulars AmtRent received

in advance 1200

Less: Advances 300 900

Interest onLoan 2000

Less: Advances: 500 1500



Unearned Revenue

Balance Sheet

Liabilities Amount Assets Amount

Rent receivedIn advance 300

Interest on loan

Received inadvance 500

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