Final account with adjustment notes:- The accounts which are prepared by the trader at the end of a financial year to ascertain the economic and physical position of the business are called final accounts.
Under this, business account, profit-loss account, financial balance etc. are made.
Trading Account
It is also called as Mal Khata. In this, the account of opening stock, all direct expenses, and sales etc. is done. Through this, the total profit / total loss of the business (Gross Profit / Loss etc.) can be ascertained.
Profit & Loss Account
By this the net profit or net loss of the business is ascertained. In this, all indirect expenditure and income are accounted for. And if any event happens at the end of the year, its account is also done in this.
Balance Sheet
This is not an account, but a statement sheet, under which we account for the assets and liabilities of the company on a certain day of the year .
Adjustment
The information given outside the trial balance is called adjustment. In other words, some are left out while preparing the trial balance. They are added while preparing the final account at the end of the year. Each adjustment has two or three accounts.
Critical adjustment
1. Outstanding Exp.
These are those expenses which are not paid even after the completion of time.
One account of this is done by adding to the related expenditure and the other account is done in the credit (liability) side of the balance sheet.
2.Prepaid Exp. ( Prepayment expense )
These are the expenses which are paid in advance
One of its accounts is deducted from the related expenses and the other account is done in the property side of the balance sheet.
3. Accrued income
This is the income that remains to be paid even after the completion of time.
One account of this is done by adding to the related income and the other account is done in the property side of the balance sheet.
4. Unaccrued Income
It is the income which is received in full advance in time.
One account of this is deducted from the related income and the other account is done in the liability side of the balance sheet.
5. Depreciation
Due to continuous use of any fixed asset, becoming obsolete, technical change etc., the decrease in value is called depreciation.
6. Provision For Bad debts
The money or money which gets sunk out of the goods sold by the trader on credit is called bad debt.
One account of this is done by deducting it from the liabilities side of the assets side of the balance sheet and the other account is done in the debit side of the profit and loss account.
7. Interest On Capital
The first argument behind applying interest on capital is that if this money is deposited by the businessman in a financial institution, then some interest will be received.
The second argument is that if the trader takes this money in business by borrowing it from someone else, then he will have to pay some interest.
One account of this is done by adding to the capital of the liability side of the balance sheet and the other account is done in the debit side of the profit and loss account.
8. Interest On Drawing
Because both business and trader are different, so the money or goods that are taken out by the merchant for personal use, which is called withdrawal. The interest on this is considered as the income of the business and the expenditure of the trader.
One account of this is done by adding to the account of the liability side of the balance sheet and the other account is done in the credit side of the profit and loss account.
9. Abnormal Loss
The loss due to any disaster or negligence or any reason is called Sky Loss.
One account of this will be deducted from the purchase of trading account and the second account will be accounted for in the asset side of balance sheet as accepted by the insurance company and third account if the insurance company has not accepted the entire claim, then the account of the rejected amount. Profit – Loss is made on the debit side.
10. Donation / Advertisement
Goods are donated or given as samples by some merchants.
One account of this is deducted from the purchases on the debit side of the trading account and the other account is done on the debit side of the profit and loss account.
Final Account Sample
1. Trading Account
| Particular | Amt Dr. | Particular | Office Cr. |
| To Wages A/c To Opening Stock A/C To Purchase A/C To Freight A/C To Carriage A/C To Sales Returns A/C | Xxxxxx Xxxxx Xxxxxx Xxxx Xxxx Xxxx | By Sales A/C By Purchase Returns A//C By Closing Stock A/C | Xxxxx Xxx xxxxxxx |
2. Profit & Loss Account
| Particular | Amt Dr. | Particular | Office Cr. |
| To Rent To Carriage Out To Advertisement To Printing To Postage To Sundry Exp. To Insurance Exp. To Tax Exp. To Discount Dr. To Salary Exp. To Travelling Exp. To Garnal Exp. To Bad debts To Interest Exp. To Freight On Sales Exp. | Xxxx Xxxx Xxxx Xxxx Xxx Xx Xxxx Xx Xx Xxxx Xxxx X Xx Xx Xx | By Gross Profit By Discount Cr. By Rent Cr. By Interest On Investment | Xxx Xxxx Xxxx Xxxx |
3. Balance Sheet
| Liabilities _ | Amt Dr. | Assets _ | Office Cr. |
| Capital Creditors Bank Overdraft Bank Loan Bills Paybale | Xxxx Xx Xx Xxx Xxx | Building Machine Furniture Cash Cash In Hand Cash At Bank Bank Debtors Good Will Investment Bills Paybale Closing Stock | Xxx Xxxx Xxxx Xxx Xxxx Xxx Xx Xxx Xxx Xxx Xx Xxx |
Final Account Question
Question – 1
| Particular | Amt Dr. | Particular | Office Cr. |
| Cash Bank Purchase Debtors Opening Stock Wages Trading Exp. Freight Sundry Exp. Salary Total | 4200 8100 6320 3200 2100 125 75 100 200 350 24770 | Sales Discount Creditors Capital Total | 8312 50 1200 15208 24770 |
Adjustment –
1. Outstanding Wages – 25
2. Prepaid Sundry Exp. – 30
3. Closing Stock – 3800
Answers –
Gross Profit ( Gross Profit) – 3442
Net Profit – 2897
Balance Sheet – 19330
Answer – 1
1 – Trading a / c ( trading account)
| Particular | Amt Dr. | Particular | Office Cr. |
| To Wage 125/- Outstanding – 25 To Purchase To Opening Stock To Freight To Gross profit Total | 150/ 6320/ 2100/ 100/ 3442/ 12112 | By Sales By Closing Stock Total | 8312/ 3800/ 12112 |
2 – Profit & Loss A/c ( Profit – Loss Account)
| Particular | Amt Dr. | Particular | Office Cr. |
| To Trading Exp. To Sundry Exp. – 200 Prepaid – 30 To Salary To Net Profit Total | 75 170 350 2897 3492 | By Gross Profit By Discount Total | 3442 50 3492 |
3 – Balance Sheet ( Economic Balance Sheet)
| Liabilities | government office | Assets | government office |
| Capital – 15208 Net Profit ( + ) 2897 Creditors Outstanding Wages Total | 18105 1200 25 19330 | Cash Bank Debtors Pripaid Sundry exp. Closing Stock Total | 4200 8100 3200 30 3800 19330 |
Account – 2
| Particular | Amt Dr. | Particular | Office Cr. |
| Cash Furniture Purchase Debtors Land & Building Opening Stock Machinery Rent & Tax Wages Discount Printing Exp. Carriage Sundry Exp. Salary Bills Receible Total | 460 600 26000 2000 8000 8000 13200 400 4300 1000 3000 1600 1000 1140 3000 73700 | Sales Bills Payble Creditors Capital Total | 40000 1400 2300 30000 73700 |
Adjustment
1. Outstanding on Wages – 100/- And Rent 40
2. Depreciation On Land & Building 2.5% And Furniture 5%
3. Reserve For Bad Debts is Declared 5%
4. Closing Stock – 3000/-
Answers –
Gross Profit – 3000/-
Net Loss – 3910/-
Balance Sheet – 29930/-
Account – 2 ( Solved )
1 – Trading a/c
| Particular | Amt Dr. | Particular | Office Cr. |
| To Purchase To Opening stock To Wages – 4300 O/S (+) – 100 To Carriage To Gross Profit Total | 26000 8000 4400 1600 3000 43000 | By Sales By Closing Stock Total | 40000 3000 43000 |
2 – Profit & Loss a/c
| Particular | Amt Dr. | Particular | Office Cr. |
| To Rent – 400 O/S (+) – 40 To Discount To printing exp. To sundry exp. To salary To reserve on debtors To dep. On furniture To dep. On land & building Total | 440 1000 3000 1000 1140 100 30 200 6910 | By Gross profit By net Loss Total | 3000 3910 6910 |
3 – Balance Sheet
| . Liabilities | government office | Assets | government office |
| Creditors B/P Outstanding on wages Outstanding on rent Capital – 30000 Net loss (-) – 3910 Total | 2300 1400 100 40 26090 29930 | Cash Furniture – 600 Depreciation – ( 5% ) – 30 Debtors – 2000 Reserve for b/d ( 5% ) – 100 Land & Building – 8000 Depreciation ( 2.5% ) – 200 Machinery B/R Closing stock Total | 460 570 1900 7800 13200 3000 3000 29930 |
Account – 3 ( Question )
| Particular | Amt Dr. | Particular | Office Cr. |
| Cash Sales returns Purchase Debtors Machinery Opening stock Freight on purchase Bills receive Salary Drawing Freight on sales Wages Bad debts Repairing Rent Total | 1000 200 10000 3410 4400 2300 130 1000 600 600 120 4500 100 200 450 29010 | Sales Bills payble Creditors Capital Purchase return Total | 15650 3200 1700 8360 100 29010 |
Adjustment
1. Outstanding on rent – 100/- and salary – 100/-
2. Depreciation on machinery – 10%
3. Interest on capital – 5%
4. Closing stock – 4000
Answer –
1. Gross profit – 2620/-
2. Net profit – 92/-
3. Balance sheet – 13370/-
Account – 4 ( Question )
| Particular | Amt Dr. | Particular | Office Cr. |
| Bank Purchase Debtors Bad Debtors Opening stock Tax & Insurance Drawing Salary Cash Wages Machinery Building B/R Total | 20000 50000 4500 400 5000 300 1000 500 1000 100 15000 30000 2000 129800/- | Sales B/P Creditors Capital Reserve or bad debts Rent Total | 100000 2500 3000 23500 300 500 129800/- |
Adjustment
1. Outstanding on salary – 100 and wages – 200/-
2. Depreciation on building – 10% and machinery – 10%
3. Provision for bad debts is declared – 5%
4. Accured rent for two month – 400/
5. Closing stock – 15000/-
Answers
1. Gross profit – 59700/
2. Net profit – 54875/
3. Balance sheet – 83175/
Account – 5 ( Question )
| Particular | Amt Dr. | Particular | Office Cr. |
| Drawing Plant & machinery Hourse & cart Debtors Purchase Wages Cash at bank Salary Repairs Opening stock Rent Misc exp. Bad debts Carriage | 1700 12000 2600 3600 2000 800 2600 800 190 1600 450 150 500 160 | Creditors Sales Interest Commission Capital | 2000 4200 1350 1600 20000 |
Adjustment
1. Closing stock – 1600/-
2. Depreciation on plant & machinery – 10% and Hourse and cart – 15%
3. Allowed interest on capital at 5%
4. 150 is due for wages
5. Paid rent – 150/ in advance
6. Accured interest – 150/
7. Commission received in advance – 200/
8. Interest on drawing – 100/
9. Further bad debts – 200/
Answer –
1. Gross profit – 1090/
2. Net loss – 640/
3. Balance sheet – 20910/