AccountingCapital Latest Questions

Palak
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    In my opinion, following are some of the difficult adjustments in final accounts. Sr No. Adjustments 1st effect 2nd effect 1 Uninsured goods destroyed by fire/accident Trading A/c - Credit side (Gross amount) Profit & Loss A/c - Debit side (Gross amount) 2 Insured goods destroyed by fire/accidenRead more

    In my opinion, following are some of the difficult adjustments in final accounts.

    Sr No. Adjustments 1st effect 2nd effect
    1 Uninsured goods destroyed by fire/accident Trading A/c – Credit side (Gross amount) Profit & Loss A/c – Debit side (Gross amount)
    2 Insured goods destroyed by fire/accident (eg. 50,000 worth of goods destroyed & insurance company accepted the claim of 40,000) Trading A/c – Credit side (Gross amount ie. 50,000) a. Balance Sheet – Asset side (Claim amount ie.40,000)
    b. Profit & Loss A/c – Debit side (Amount of Loss ie.10,000)
    3 Unrecorded Purchases Trading A/c – Debit side (Add to Purchases) Balance Sheet – Liability side (Add to Creditors)
    4 Unrecorded Sales Trading A/c – Credit side (Add to Sales) Balance Sheet – Asset side (Add to Debtors)
    5 Provision for Discount on Debtors Profit & Loss A/c – Debit side Balance Sheet – Asset side (Deducted from Debtors)
    6 Provision for Discount on Creditors Profit & Loss A/c – Credit side Balance Sheet – Liability side (Deducted from Creditors)
    7 Bills Receivable dishonoured Balance Sheet – Asset side (Add the amount of bills dishonoured to Debtors) Balance Sheet – Asset side (Deduct the amount of bills dishonoured from Bills Receivable)
    8 Bills Payable dishonoured Balance Sheet – Liability side (Add the amount of bills dishonoured to Creditors) Balance Sheet – Liability side (Deduct the amount of bills dishonoured from Bills Payable)
    9 Deferred Expenses (eg. Advertisement expenses paid for 5 years) Profit & Loss A/c – Debit side (Advertisement expenses related to current year ie. 1/5th of Total) Balance Sheet – Asset side (Remaining amount of advertisement is shown as Prepaid advertisement ie. 4/5th of Total)
    10 Revenue Receipts included in Capital Receipts (eg. Sale of Goods included in Sale of Furniture) Trading A/c – Credit side (Add to Sales) Balance Sheet – Asset side (Add back the sales amount to Furniture)
    11 Revenue Expenditure included in Capital Expenditure Trading A/c /Profit & Loss A/c – Debit side (Add to that particular Revenue Expenditure) Balance Sheet – Asset side (Deduct from that particular asset)
    12 Capital Expenditure included in Revenue Expenditure Trading A/c /Profit & Loss A/c – Debit side (Deduct from that particular Revenue Expenditure) Balance Sheet – Asset side (Add to that particular asset)
    13 Manager is allowed commission at a certain % on Net Profit

    a. If commission eg.10% is quoted on “Net Profit before charging such commission”:
    Commission amount = Profit before commission * 10/100

    b. If commission eg.10% is quoted on “Net Profit after charging such commission”:
    Commission amount = Profit before commission * 10/110

    Profit & Loss A/c – Debit side (Manager’s Commission) Balance Sheet – Liability side (Outstanding Manager’s Commission), OR
    Balance Sheet – Asset side (Reduce from Cash/Bank)
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