In this article let us see what are all
the adjustments are to be made in order to prepare final accounts. When we are
preparing final accounts at the end of every accounting period adjustments gets
into scenario. The adjustments may be in the form of the expenses of current
year are still payable or income of the current year remains still receivables
or income of the next year has been received during current year. So now let us
see the adjustments to be made one by one.
§ Closing Stock:
Closing Stock
A/c Debit
To Trading A/c
§ Depreciation:
Depreciation
A/c Debit
To
Asset A/c
Adjustment – To be posted on Debit Side of P&L A/c
§ Appreciation:
Asset A/c Debit
To
Appreciation A/c
In Trading and Profit and Loss A/c credit side
§ Outstanding Expenses:
Expense A/c Debit
To
O/S Expense A/c
Adjustment in trading and P&L A/c to be added debit side and
adjustment in B/S on liability side
§ Prepaid Expenses:
Prepaid
Expenses A/c Debit
To
Expenses A/c
Adjustment in trading and Profit and Loss A/c – Deduction from
debit side and adjustment in B/S shown at the asset side
§ Accrued Income
Accrued Income
A/c Debit
To Income A/c
Adjustment –
Added to concerned income at credit side of P&L A/c and Shown at the asset
side of the B/S
§ Unearned Income
Income A/c Debit
To Unearned Income A/c
Adjustment –
Deducted from concern income at credit side of P&L A/c and Shown on
Liability side of B/S
§ Interest on Capital
Interest on
Capital A/c Debit
To Capital A/c
Adjustment-
Posted on debit side of P&L A/c and shown on asset side of B/S
§ Interest on Drawings
Drawings A/c Debit
To Interest on Drawing A/c
Adjustment –
Posted on credit side of the P&L
§ Interest on Investments
Investment A/c Debit
To Interest on Investment A/c
Adjustment -
Posted on credit side of P&L A/c and added to investment on the asset side
of BalanceSheet
§ Interest on Loans (Borrowed)
Interest on
Loan A/c Debit
To Interest on Investment A/c
Adjustment –
Posted on debit side of P&L A/c and added to loan at the liabilities side.
§ Interest on Loan (Advanced)
Loan A/c Debit
To Interest on Loan A/c
Adjustment – To
be posted on credit side of P&L A/c and added to loan on the asset side of
the BalanceSheet.
§ Bad debts
Bad Debts A/c Debit
To Debtors
Adjustments –
To be posted on debit side of P&L A/c and deducted from debtors at asset
side
§ Provision for Bad Debts
P&L A/c Debit
To Debtors A/c
Adjustment
- To be posted on debit side of P&L
A/c and Deducted from debtors at asset side of Balance Sheet.
§ Provision for Discount on Debtors
P&L A/c Debit
To Provision for Bad Debts A/c
Adjustments –
Debit side of P&L A/c and Deduct from debtors on the asset side of B/S
§ Provision for Discount on Creditors
Provision for
Discount on Creditors A/c Debit
To P&L A/c
Adjustment –
Credit side of P&L A/c and Deduct from creditors from liabilities side of
B/S
§ Accidental Loss of Stock
Loss of Stock
A/c Debit
To Trading / Purchase A/c
Adjustment –
Deduct from purchase or post credit side of trading A/c or debit side of
P&L A/c.
§ Accidental Loss of Goods if Insured
Insurance
Company A/c Debit
Loss of Goods Debit
To Trading A/c
Adjustment –
Credit Side of trading A/c or debit side of P&L A/c and Insurance
company A/c shown on the asset side of
B/S
§ Loss of Asset by Fire
Loss by fire
A/c Debit
To Asset A/c
Adjustment –
Debit side of P&L A/c and Loss will be deductible from asset side of B/S
§ Accidental Loss of Asset (If insured)
Insurance
Company A/c Debit
Loss of Asset
A/c Debit
To Asset A/c
Adjustment –
Debit side of P&L A/c and Insurance company A/c to be shown on asset side.
Loss of asset will be deductible from concerned asset in B/S
§ O/s Managers Commission
P&L A/c Debit
To
O/S Managers commission A/c
Adjustment – To
be posted on debit side of P&L A/c and shown on the liability side of B/S
§ Goods Taken By Proprietor for Personal Use
Drawing A/c Debit
To Purchase A/c
Adjustment –
Deduct from purchases in trading A/c and Deduct from Capital on Liability side
of B/S
§ Goods Given as Charity
Charity A/c Debit
To Purchase A/c
Adjustment –
Deduct from purchase from debit side of trading A/c and deductible from capital
from asset side of B/S
§ Goods Distributed as free samples
Advertising / Free Sample A/c Debit
To Purchase
A/c
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