Question

2. (Journal Entries) At the end of an accounting year, a trader finds that no entry has
been passed in the books of accounts in respect of the following transactions :



Outstanding Rent at the end of the year 2200

Goods given as charity 1300


Stock-in-hand at the end of the year 1,20,000

Charge depreciation on Machinery @ 12% for one month (Machinery 3 1,00,000)

Received interest from the debtors 500

Charge interest on Capital ( 50,000) at 6% p.a.

Interest charged on drawings @ 5% when total drawings were 40,000

Answer 1

There are various adjustment entries need to be passed at the end of financial year as there are certain expenses which are either paid in advance or not paid.

Outstanding expenses are those expenses which are due but not paid but services are already provided for. This is actually a liability of the business against the services taken.

In such cases, respective expenses account to be debited and outstanding expenses liability account to be credited.

Accounting entry will be as under:

Rent A/c Dr.

To Outstanding Rent A/c.