Question 16.
(Adjustment Entries) From the following information available on 31st March, 2018, pass the necessary Adjustment Entries in the Journal for the year ending on that date:
(i) Interest accrued ₹ 2,500.
(ii) Wages for March, 2018 outstanding ₹ 10,000.
(iii) Insurance prepaid ₹ 1,500.
(iv) Commission due to Manager 6% on net profit after charging such commission. The profit before charging such commission was ₹ 1,06,000.
(v) Interest due on loan but not paid. Loan of ₹ 1,50,000 was taken at 9% p.a. 9 months before end of the year.
Answers
The journal entries are shown below:
Explanation:
The journal entries are as follows:
1.
Accrued Interest A/c.......................DR Rs 2,500
To Interest A/c....................................CR Rs 2,500
Being Interest accrued
2.
Wages A/c...............................Dr Rs 10,000
To Wages outstanding A/c......Cr Rs 10,000
Being wages for the month of march are outstanding
3.
Prepaid Insurance A/c..................Dr Rs 1,500
To Insurance A/c.........................Cr Rs 1,500
Being insurance is prepaid
4.
Manager commission A/c...........................................Dr Rs 106,000
To Manager commission payable A/c..........................Cr Rs 106,000
Being commission due to manager
5.
Interest on Loan A/c...........................Dr Rs 10,125
To Outstanding interest on loan A/c.......Cr Rs 10,125
Being interest on loan due but not paid
Working note:
Interest = Rs 150,000 × 9% × 9/ 12
= Rs 10,125
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