adjustment in preparation of financial statements rent amount 22000 adjustment rent is paid for 11 month
Answers
Answer:
22000/11=2000 rent per month
rent paid for 11 months and 1month rent 2000 is outstanding
In profit and loss account
rent 22000
(+) outstanding. 2000
rent.
total. 24000
in balance sheet outstanding rent 2000 is show on liability side
Profit and loss account - Rent amount ₹24,000
Closing balance sheet - outstanding rent amount ₹2,000
When preparing financial statements, expenses come on the debit side of the profit and loss account and profits on the credit side. Assets and liabilities are recorded in balance accordingly. Here, the rent amount is given ₹22,000 but in adjustments, it is said that the rent is paid for 11 months which means ₹22,000 is only 11 months rent. One month's rent is still outstanding. Here is how we will adjust it:
Total rent for 11 months = ₹22,000
Rent for 1 month = 22,000/11 = ₹2,000
Total rent for 12 months = 22,000 + 1 month outstanding rent
= 22,000 + 2000 = ₹24,000
Total rent for 12 months is ₹24,000 will be debited to the profit and loss account and Rent outstanding for 1 month is ₹2,000 will come in the liabilities side of the balance sheet.