FINAL ACCOUNTS

Treatment Adjustments in final accounts Adjustments Trading and P & L Account Balance Sheet 1. Closing stock Posted at the credit side of Shown on the assets side trading a/c 2. Depreciation Posted at the debit side of profit Shown as deduction from and loss account concerned asset 3. Outstanding expenses Added to the concerned expense Show at the liabilities side at the debit side of profit and loss or trading account 4. Prepaid expenses Deducted from the concerned Shown at the assets side expense at the debit side of profit and loss account 5. Accrued income or Added to the concerned income Shown at the assets side Income receivable at the credit side of profit and loss account Shown at the liabilities side Deducted from concerned 6. Unearned income or income at the credit side of Income received in profit and loss account advance 7. Interest on capital Posted at the debit side of profit Added to capital at the and loss account liabilities 8. Interest on drawings Posted at the credit side of profit Deducted from capital at and loss account the liabilities 9. Interest on investment Posted at the credit side of profit Added to investment at the and loss account assets side 10. Interest on loans Posted at the debit side of profit Added to loan at the and loss account liability side 11. Bad debts Posted at the debit side of profit Deducted from debtors at and loss account the asset side Posted at the debit side of profit Deducted from debtors at 12. Provision for bad and loss account the assets side debts or provision for doubtful debt 13. Provision for bad If new provision is more than New provision is to be debts (where already old provision, the difference is deducted from debtors at provision exists) to be debited to profit and loss the assets side account and vice-versa. 14. Provision for discount Posted at the debit side of profit Deducted from debtors at on debtors and loss account the assets side 15. Provision for discount Posted at the credit side of profit Deducted from creditors at on creditors and loss account the liabilities side` 16. Accident loss of stock Posted at the credit side of No effect (not insured) trading account and also at the debit side of profit and loss account 17. Accidental loss of Gross loss is shown in the credit Insured portion of loss is stock (insured partial side of trading account. Un shown at asset side as admission of claim) insured loss is shown in P & L insurance claim a/c debit side

18. Outstanding managers commission 19. Goods taken by the proprietor for personal use

20. Goods given as charity and Goods distributed as free samples 21. Wages paid for construction of building was debited to wages a/c 22. Goods sold on sale or return

23. Goods received but not recorded in books 24. Transfer to reserve fund 25. Erection charges paid on machinery debited to wages a/c

Posted at the debit side of P &L a/c Amount of goods taken by the proprietor will be deducted from purchases in trading account Deducted from purchase at the debit side of trading account. It is shown on the debit side of profit and loss account The amount will be deducted from wages at debit side of trading account Sales in trading account should be reduced(at selling price), and added to closing stock at the credit side of trading account(at cost price) Add to purchases in trading a/c It is shown on the debit side of profit and loss account Wages a/c in trading account will be reduced

Shown at the liabilities side Deducted from capital in liabilities side

The amount will be added to buildings at the assets side Deduct from debtors in assets side

Add to creditors in liabilities side Shown on the liabilities side of the balance sheet Machinery account in balance sheet will be increased by an identical amount

1. Income tax is given in trail balance deduct the same from capital in balance sheet. 2. While calculating depreciation on assets any amount wrongly included in purchases a/c, included in wages like erection charges shall be added to the asset. 3. While calculating reserve for bad and doubtful debts on debtors deduct bad debts given in adjustments. 4. While calculating reserve for discount on debtors deduct reserve for bad debts in adjustments.