Final account with adjustment notes

Final account with adjustment notes

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 โ€“ 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

ParticularAmt Dr.ParticularOffice 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/CXxxxxx Xxxxx Xxxxxx Xxxx Xxxx XxxxBy Sales A/C By Purchase Returns A//C By Closing Stock A/CXxxxx Xxx xxxxxxx
Trading Account

2.     Profit & Loss Account

ParticularAmt Dr.ParticularOffice 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 XxBy Gross Profit By Discount Cr. By Rent Cr. By Interest On Investment  Xxx Xxxx Xxxx Xxxx  
Profit & Loss Account

3. Balance Sheet

Liabilities _ Amt Dr.Assets _Office Cr.
Capital Creditors Bank Overdraft Bank Loan Bills PaybaleXxxx Xx Xx Xxx XxxBuilding Machine Furniture Cash Cash In Hand Cash At Bank Bank Debtors Good Will Investment Bills Paybale Closing StockXxx Xxxx Xxxx Xxx Xxxx Xxx Xx Xxx Xxx Xxx Xx Xxx
 Balance Sheet

Final Account Question

Question โ€“ 1

ParticularAmt Dr.ParticularOffice Cr.
Cash Bank Purchase Debtors Opening Stock Wages Trading Exp. Freight Sundry Exp. Salary   Total4200 8100 6320 3200 2100 125 75 100 200 350   24770Sales Discount Creditors Capital               Total8312 50 1200 15208               24770
Final Account

Adjustment โ€“

1.     Outstanding Wages โ€“ 25

2.     Prepaid Sundry Exp. โ€“ 30

3.     Closing Stock โ€“ 3800

Answers โ€“

Gross Profit ( Gross Profit) โ€“ 3442

Net Profit – 2897

Balance Sheet – 19330

Answer โ€“ 1

 1 – Trading a / c ( trading account)

ParticularAmt Dr.ParticularOffice 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           Total8312/ 3800/           12112
 trading account

2 โ€“ Profit & Loss A/c ( Profit โ€“ Loss Account)

ParticularAmt Dr.ParticularOffice Cr.
To Trading Exp. To Sundry Exp. โ€“ 200       Prepaid  –  30 To Salary   To Net Profit   Total     75   170 350   2897   3492By Gross Profit By Discount           Total3442 50           3492
Profit & Loss A/c

 3 โ€“ Balance Sheet ( Economic Balance Sheet)

Liabilitiesgovernment officeAssetsgovernment office
Capital   –  15208       Net Profit ( + ) 2897 Creditors Outstanding Wages     Total  18105 1200 25     19330Cash Bank Debtors Pripaid Sundry exp. Closing Stock   Total4200 8100 3200 30 3800   19330
Balance Sheet

 Account โ€“ 2

ParticularAmt Dr.ParticularOffice Cr.
Cash Furniture Purchase Debtors Land & Building Opening Stock Machinery Rent & Tax Wages Discount Printing Exp. Carriage Sundry Exp. Salary Bills Receible   Total460 600 26000 2000 8000 8000 13200 400 4300 1000 3000 1600 1000 1140 3000   73700Sales Bills Payble Creditors Capital                         Total40000 1400 2300 30000                         73700
final account with adjustment notes

Adjustment

1.     Outstanding on Wages โ€“ 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 โ€“ 3000/-

Answers โ€“

Gross Profit โ€“ 3000/-

Net Loss โ€“ 3910/-

Balance Sheet โ€“ 29930/-

Account โ€“ 2 ( Solved )

 1 – Trading  a/c    

ParticularAmt Dr.ParticularOffice Cr.
To Purchase To Opening stock To Wages  –  4300     O/S  (+)  –  100 To Carriage To Gross Profit   Total26000 8000   4400 1600 3000   43000By Sales By Closing Stock           Total40000 3000           43000
final account with adjustment notes

2 โ€“ Profit & Loss a/c

ParticularAmt Dr.ParticularOffice 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   6910By Gross profit             By net Loss     Total3000             3910     6910
final account with adjustment notes

  3 โ€“ Balance Sheet 

. Liabilities        government officeAssetsgovernment office
Creditors B/P Outstanding on wages Outstanding on rent Capital  – 30000 Net loss (-) –  3910           Total2300 1400 100 40   26090           29930Cash Furniture  –  600 Depreciation  – ( 5% ) โ€“ 30 Debtors  –  2000 Reserve for b/d ( 5% )  –  100 Land & Building  –  8000 Depreciation   ( 2.5% )  –  200 Machinery B/R Closing stock   Total460   570   1900   7800 13200 3000 3000   29930

Account โ€“ 3  ( Question )

ParticularAmt Dr.ParticularOffice Cr.
Cash Sales returns Purchase Debtors Machinery Opening stock Freight on purchase Bills receive Salary Drawing Freight on sales Wages Bad debts Repairing Rent   Total1000 200 10000 3410 4400 2300 130 1000 600 600 120 4500 100 200 450   29010Sales Bills payble Creditors Capital Purchase return                       Total15650 3200 1700 8360 100                       29010

Adjustment

1.     Outstanding on rent โ€“ 100/- and salary  – 100/-

2.     Depreciation on machinery โ€“ 10%

3.     Interest on capital โ€“ 5%

4.     Closing  stock  –  4000

Answer โ€“

1.     Gross profit  –  2620/-

2.     Net profit โ€“ 92/-

3.     Balance sheet  – 13370/-

 Account โ€“ 4 ( Question )

ParticularAmt Dr.ParticularOffice Cr.
Bank Purchase Debtors Bad Debtors Opening stock Tax & Insurance Drawing Salary Cash Wages Machinery Building B/R   Total20000 50000 4500 400 5000 300 1000 500 1000 100 15000 30000 2000   129800/-Sales B/P Creditors Capital Reserve or bad debts Rent                 Total100000 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.ParticularOffice Cr.
Drawing Plant & machinery Hourse & cart Debtors Purchase Wages Cash at bank Salary Repairs Opening stock Rent Misc exp. Bad debts Carriage1700 12000 2600 3600 2000 800 2600 800 190 1600 450 150 500 160  Creditors Sales Interest Commission Capital2000 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 โ€“

1.     Gross profit  –  1090/

2.     Net loss –  640/

3.     Balance sheet  –  20910/

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