Subject: Other
The following are adjustment entries of journal proper:
Closing stock is valued after the preparation of trial balance. At the time of closing the account of a business, the unsold stock should be valued either at cost or market value whichever is lower.
They are also known as unpaid expenses or outstanding expenses. The expenses incurred but not paid till the end of accounting year must be adjusted while preparing final accounts.
They are also known as unexpired expenses or expenses paid-in-advance. The expenses which have been paid in advance is to be taken into account while preparing final accounts. Otherwise, true picture of profit or loss cannot be ascertained.
It is also known as receivable income or income earned but not yet received. Such receivable incomes should be adjusted while preparing final accounts.
The income of the next year received in the current year is called incomes received-in-advance. Such advance received income which is also called pre-received income should be adjusted while preparing final accounts.
The fixed assets are acquired by the business for generating revenues. In other word, assets are utilized in revenue generating activities. The decrease in value of the assets because of the use for the business is considered as depreciation. The value of depreciation is to be adjusted while preparing final accounts.
Interest is charged on the capital contributed by the owners of the business at a given rate. The amount of interest not paid during the period is to be adjusted, while preparing final accounts.
The borrowing taken from the outside parties is regarded as loan. The interest on loan remained outstanding needs to be adjusted while preparing final accounts.
The value of goods damaged by accident must be adjusted at the time of preparing final accounts. The loss of goods by accident can be adjusted in the following way:
The trial balance of a firm as on 31st Chaitra, 2071 is given below:
Particulars |
Debit Amount |
Credit Amount |
Capital |
|
300000 |
Sales |
|
8,00,000 |
Bank loan |
|
2,50,000 |
Creditors |
|
50,000 |
Cash in hand |
40000 |
|
Debtors |
60,000 |
|
Fixed assets |
7,00,000 |
|
Office expenses |
2,00,000 |
|
Salaries |
2,50,000 |
|
Other expenses |
1,50,000 |
|
Additional information:
Provide depreciation @10% p.a. on fixed assets.
Required: Adjusted Trial Balance
Solution:
Adjusted trial balance of a firm
For the year ended 31st Chaitra, 2071
SN | Account Title | Unadjusted trial balance | Adjustments | Adjusted trial balance | |||
Dr. Amt | Cr. Amt | Dr. Amt | Cr. Amt | Dr. Amt | Cr. Amt | ||
1. | Capital | 3,00,000 | 3,00,000 | ||||
2. | Sales | 8,00,000 | 8,00,000 | ||||
3. | Bank loan | 2,50,000 | 2,50,000 | ||||
4. | Creditors | 50,000 | 50,000 | ||||
5. | Cash in hand | 40,000 | 40,000 | ||||
6. | Debtors | 60,000 | 60,000 | ||||
7. | Fixed assets | 7,00,000 | 70,000 | 6,30,000 | |||
8. | Office expenses | 2,00,000 | 2,00,000 | ||||
9. | Salaries | 2,50,000 | 10,000 | 2,60,000 | |||
10. | Other expenses | 1,50,000 | 1,50,000 | ||||
Additional information: | |||||||
a) | Depreciation on fixed assets | 70,000 | 70,000 | ||||
b) | Outstanding salaries | 10,000 | 10,000 | ||||
Total | 14,00,000 | 14,00,000 | 80,000 | 80,000 | 1,41,000 | 1,41,000 |
The following data are related with Kailali Trading Concern as on 31st Chaitra 2070:
Particulars |
Debit Amount |
Credit Amount |
Opening stock |
10,000 |
|
Wages |
5,000 |
|
Purchases |
2,00,000 |
|
Sales |
|
4,50,000 |
Building |
5,00,000 |
|
Salary |
10,000 |
|
Creditors |
|
1,50,000 |
Adjustment |
|
12,500 |
Additional information:
Outstanding wages Rs.2,000.
Depreciation of the building by 5%.
Prepaid salary to the extent of Rs.3,000.
Required: Adjusted Trial Balance
Solution:
Adjusted Trial Balance of Kailali Trading Concern
For the year ended 31st Chaitra 2070
SN | Account Title | Unadjusted trial balance | Adjustments | Adjusted trial balance | |||
Dr. Amt | Cr. Amt | Dr. Amt | Cr. Amt | Dr. Amt | Cr. Amt | ||
1. | Opening stock | 10,000 | 10,000 | ||||
2. | Wages | 5,000 | 2,000 | 3,000 | |||
3. | Purchases | 2,00,000 | 2,00,000 | ||||
4. | Sales | 4,50,000 | 4,50,000 | ||||
5. | Building | 5,00,000 | 25,000 | 4,75,000 | |||
6. | Salary | 10,000 | 3,000 | 7,000 | |||
7. | Creditors | 1,50,000 | 1,50,000 | ||||
8. | Adjustment | 12,500 | 12,500 | ||||
Additional information: | |||||||
a) | Outstanding wages | 2,000 | 2,000 | ||||
b) | Depreciation on building | 25,000 | 25,000 | ||||
c) | Prepaid salary | 3,000 | 3,000 | ||||
7,25,000 | 7,25,000 | 30,000 | 30,000 | 7,27,000 | 7,27,000 |
Prakash Trading Concern shows the following account balance as on 31st December 2007.
Particulars |
Debit Amount |
Credit Amount |
Fixed assets |
1,50,000 |
|
Cash |
10,000 |
|
Purchases |
2,00,000 |
|
Sales |
|
3,00,000 |
Administrative expenses |
15,000 |
|
Account payable |
|
15,000 |
Debtors |
30,000 |
|
Capital |
|
1,00,000 |
Prepaid insurance |
10,000 |
|
Additional information:
Insurance expired Rs.4,000.
Create provision for doubtful debts on debtors by 5%.
Required: Adjusted Trial Balance
Solution:
Adjusted trial balance of Prakash Trading
For the year ended 31st December 2007
SN | Account Title | Unadjusted trial balance | Adjustments | Adjusted trial balance | |||
Dr. Amt | Cr. Amt | Dr. Amt | Cr. Amt | Dr. Amt | Cr. Amt | ||
1. | Fixed assets | 1,50,000 | 1,50,000 | ||||
2. | Cash | 10,000 | 10,000 | ||||
3. | Purchases | 2,00,000 | 2,00,000 | ||||
4. | Sales | 3,00,000 | 3,00,000 | ||||
5. | Administrative expenses | 15,000 | 15,000 | ||||
6. | Account payable | 15,000 | 15,000 | ||||
7. | Debtors | 30,000 | 1,500 | 28,500 | |||
8. | Capital | 1,00,000 | 1,00,000 | ||||
9. | Prepaid insurance | 10,000 | 4,000 | 6,000 | |||
Additional information: | |||||||
a) | Insurance expired | 4,000 | 4,000 | ||||
b) | Provision for bad debts | 1,500 | 1,500 | ||||
Total | 4,15,000 | 4,15,000 | 5,500 | 5,500 | 41,500 | 41,500 |
The following unadjusted trial balance is provided:
Particulars |
Debit Amount |
Credit Amount |
Office Equipment |
1,20,000 |
|
Wages |
2,600 |
|
Prepaid rent |
4,800 |
|
Bills receivable |
4,000 |
|
Cash at bank |
17,800 |
|
Creditors |
|
80,000 |
Capital |
|
64,800 |
Service revenue |
|
15,200 |
Drawing |
2,000 |
|
Salaries |
6,400 |
|
Sundry expenses |
2,400 |
|
Adjustments
Prepaid rent expired Rs.1,200
Wages payable Rs.1,000
Depreciation on office equipment 10%
Required: Adjusted Trial Balance
Solution:
Adjusted trial balance
SN | Account Title | Unadjusted trial balance | Adjustments | Adjusted trial balance | |||
Dr. Amt | Cr. Amt | Dr. Amt | Cr. Amt | Dr. Amt | Cr. Amt | ||
1. | Office Equipment | 1,20,000 | 1,200 | 1,08,000 | |||
2. | Wages | 2,600 | 1,000 | 3,600 | |||
3. | Prepaid rent | 4,800 | 1,200 | 3,600 | |||
4. | Bills receivable | 4,000 | 4,000 | ||||
5. | Cash at bank | 17,800 | 17,800 | ||||
6. | Creditors | 80,000 | 80,000 | ||||
7. | Capital | 64,800 | 64,800 | ||||
8. | Service revenue | 15,200 | 15,200 | ||||
9. | Drawing | 2,000 | 2,000 | ||||
10. | Salaries | 6,400 | 6,400 | ||||
11. | Sundry expenses | 2,400 | 2,400 | ||||
Additional information: | |||||||
a) | Prepaid rent expired | 1,200 | |||||
b) | Wages payable | 1,000 | |||||
c) | Depreciation on office expenses | 1,200 | |||||
Total | 1,66,000 | 1,66,000 | 14,200 | 14,200 | 1,61,000 | 1,61,000 |
© 2019-20 Kullabs. All Rights Reserved.