Al-Syed College of Commerce (ACC)

ADJUSTMENTS AT A GLANCE
S.No. Adjustment Alternative
Outstanding/due/unpaid/ accrued/arrear/ still payable/not yet paid/ owing Prepaid/unexpired/ paid in advance/carry forward to the next year

Adjusting Entry

Effect on Trading or P&L A/c

Added in related item or the Dr. side of Trading or P&L A/c Deducted in related item or the Dr. side of Trading or P&L A/c Added in related item or the Cr. side of Trading or P&L A/c Deducted in related item or the Dr. side of Trading or P&L A/c Dr. Profit & Loss A/c Dr. Profit & Loss A/c Cr. Profit & Loss A/c Dr. Profit & Loss A/c

Effect on Balance Sheet

Liabilities side of the Balance Sheet Assets side of the Balance Sheet Assets side of the Balance Sheet Liabilities side of the Balance Sheet Deduction out of concerned asset in the asset side Added in the capital in the Liability side Deduction out of the capital in the liability side Deduction out of debtors in the asset side Deduction out of debtors in the asset side

Outstanding Expenses

Expense To Outstanding Expenses

Prepaid Expenses

Prepaid Expenses To Expense

Accrued Income

Accrued/Receivable

Accrued Income To Income

Unearned Income

Unearned/Received in Advance/Unexpired

Income To Unearned Income

5 6 7 8

Depreciation

Decrease or reduce in value/write off

Deprecation To Asset Interest on capital To capital

Interest on capital Interest on drawing Provision for bad debts Provision for discount on debtors

------------

------------

Capital/drawings To Interest on drawings

Reserve/allowance for bad debts

Profit & Loss/Bad debts To provision for bad debts Profit & Loss/discount on debtors To provision for discount on debtors Provision for discount on creditors To Profit & Loss/ discount on debtors Closing Stock To Trading Account

Reserve/allowance for discount

Dr. Profit & Loss A/c

10

Provision for discount on creditors

Reserve/allowance for discount

Cr. Profit & Loss A/c

11

Closing Stock

Stock/Inventory

Cr. Trading A/c

Deduction out of the creditors in the liability side Assets side of the Balance Sheet

PRACTICE QUESTION
Prepared by:

Al-Syed College of Commerce (ACC)

The books of the business concern are closed at the end of the calendar year; pass the necessary adjusting entries in the books. When preparing the final accounts on 31 st December, 2009. a) Rs.3000 being the salary of Mr. Adnan for December 2009 has not been paid. b) Rent amounting to Rs.12000 paid on 1st July 2009 for 12 months ending on 30th June 2010. c) Interest on Investment Rs.400 has accrued but not yet received. d) Rs.2000 received in advance from Ali as commission. e) Building at 5%, machinery at 10% are to be depreciated (Building Rs.200000, Machinery Rs.50000) f) Interest on Capital at 6% is to be provided (capital Rs.100000) g) Interest on Drawings at 6% is to be provided (drawings Rs.5000) h) Land at 10% to be appreciated the cost of the Land is Rs.200000 i) Rs.200 proved bad debts at the end of the year. j) Provision for bad debts on debtors is created at the rate of 5% at the end of the year (Debtors amounts Rs.12200) k) Provision for discount on above debtor is created at the rate of 2%. l) Provision for discount on above creditors to be made at the rate of 2% (the amount of the creditors is Rs.10000)

Prepared by: