What are some difficult adjustments in final accounts?

-This question was submitted by a user and answered by a volunteer of our choice.

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