Question

Final accounts without adjustments examples

Answer 1

There are many adjustment because earlier we have not passed any journal entry , so at the time of making final account we have to adjust them . 

Name of items

Adjustment entry

Effect on trading and profit and loss account

Effect on balance sheet

1. Closing stock

Closing stock account dr. xxx

To trading account xxx

Closing stock will write in the credit side of trading account

It will show as asset in the final account

2. outstanding expenses or expenses payable or expenses due but not paid

Expenses account dr. xxx

To outstanding exp. xxx

Outstanding expenses will add in expenses . if it is direct it will go to trading account’s debit side , if it is indirect nature then it will go to the debit side of profit and loss account

It will be the current liability so it will go to the liability side of balance sheet.

3. advanceexpenses

Advanceexpenses a/c dr. xxx

To expenses account xxx

It will deduct from respective expenses paid .

It will be the current asset so it will go to assets side of balance sheet

4. income receivable

Outstanding income account dr. xxx

To income account xxx

It will add in the income and go to credit side of profit and loss account

It will show as asset in the assets side of balance sheet

5. income received in advance

Income account dr. xxx

To advanceincome account xxx

It will deduct from the income received

It will shown as liability in the liabilities side of balance sheet

6 Goods use for personal use

Drawing account dr. xxx

To purchase account

It will deduct from purchase in the debit side of trading account

= purchase –drawing in goods

It will deduct from capital in the liabilitiesside of balance sheet

=capital- drawing in goods

7. Destroyed of goods

loss by fire or accident account Dr. xxx

To trading

If there is no insurance

It will also go to profit and loss account

Profit and loss account dr. xxx

To loss by fire / accident

It will shown in credit side of trading account

And also in profit and loss account’s debit side

It will not go to balance sheet

8. Depreciation

Depreciation account dr. xxx

To respective asset account xxxx

It will go to the debit side of profit and loss account

It will deduct from fixed asset . Because it decrease the value of asset

=fixed asset - depreciation

9. provisional for doubtful debts

If you have make any provision for doubt ful debts the its journal entry will passed

Provision for doubtful debt account dr. xxx

To Bad debts account xxx

( New bad debts which is not shown in trial balance will transfer to provision for doubtful debt account )

Net value of provision for doubtful debt account transfer to profit and loss account’s debit side

=total bad debt + closing balance or provision of doubtful debt or this year provision - opening balance of provision for doubtful debts

Deduct from debtor

= debtor – new bad debts – this year provision or closing balance of provision for bad debts

10. Commission to manager

Commission account dr. xxx

To outstanding commission

It will shown in the debit side of profit and loss account as o/s commission to manager

If it charge on the amount after charging such commission then we will calculate

= profit before commission X Rate/ 100+rate

It will shown as liability