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Discy Latest Questions

  1. This answer was edited.

    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.Adjustments1st effect2nd effect
    1Uninsured goods destroyed by fire/accidentTrading A/c – Credit side (Gross amount)Profit & Loss A/c – Debit side (Gross amount)
    2Insured 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)
    3Unrecorded PurchasesTrading A/c – Debit side (Add to Purchases)Balance Sheet – Liability side (Add to Creditors)
    4Unrecorded SalesTrading A/c – Credit side (Add to Sales)Balance Sheet – Asset side (Add to Debtors)
    5Provision for Discount on DebtorsProfit & Loss A/c – Debit sideBalance Sheet – Asset side (Deducted from Debtors)
    6Provision for Discount on CreditorsProfit & Loss A/c – Credit sideBalance Sheet – Liability side (Deducted from Creditors)
    7Bills Receivable dishonouredBalance Sheet – Asset side (Add the amount of bills dishonoured to Debtors)Balance Sheet – Asset side (Deduct the amount of bills dishonoured from Bills Receivable)
    8Bills Payable dishonouredBalance Sheet – Liability side (Add the amount of bills dishonoured to Creditors)Balance Sheet – Liability side (Deduct the amount of bills dishonoured from Bills Payable)
    9Deferred 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)
    10Revenue 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)
    11Revenue Expenditure included in Capital ExpenditureTrading A/c /Profit & Loss A/c – Debit side (Add to that particular Revenue Expenditure)Balance Sheet – Asset side (Deduct from that particular asset)
    12Capital Expenditure included in Revenue ExpenditureTrading A/c /Profit & Loss A/c – Debit side (Deduct from that particular Revenue Expenditure)Balance Sheet – Asset side (Add to that particular asset)
    13Manager 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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