Asset Purchased Sold Adjustment in Final Accounts

 

Adjustments given below trial balance must be adjusted for final account.

Adjustment entry means not adjusted while preparing trial balance.

It is also known additional information.

Almost all the adjustment entry effects dual aspect.

One is debit and other is credit. 

There are a number of adjustments to be made while finalizing the financial statements.

But our discussion will be limited to the following adjustments (limited by the curriculum):  

 

Major Adjustments in Final Accounts

Closing stock Outstanding expenses Prepaid expenses Accrued income or income receivable   Advance income or unearned income Depreciation on assets Appreciation on assets Written off or amortized Purchase or sale of fixed assets Bad debts, provision and discount Bad debts recovered

Goods loss by fire and insurance claim Goods distribute as free sample Manager’s commission Bonus or pension to employees Create reserve or fund  Goods sold on sale or return basis Hidden adjustment: (a) Interest on loan or debenture (b) Interest on investment (c) Monthly rent and salary

 

Purchase or Sales of Fixed Assets

Organization may purchase or sale fixed assets.

Although it is not purchase every year yet it can be purchased during the accounting period.

If fixed assets are purchased, it has common transaction but when fixed assets are sold, there may be profit or loss on sales of fixed assets.

Profit on assets is known capitalized profit and loss as capitalized loss.

Profit is credited but loss is debited.

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = 

ADJUSTMENT: 9A

Extracted data:

ABC Traders has furniture worth Rs 60,000. Out of them having book value Rs 25,000 has sold for Rs 15,000.

Required: (1) Journal entry; (2) Show in profit and loss account and balance sheet 

 

Journal Entry

Date	Particulars		LF	Amount	Amount
	Bank account  Profit and loss account (loss)                   To Furniture account (Being- furniture cost Rs 25,000 has sold for Rs 15,000)	Dr Dr		15,000 10,000	25,000

 

P&L Account

Particulars		Amount	Particulars		Amount
To Loss on sales of furniture		10,000

 

Balance Sheet

Liabilities		Amount	Assets		Amount
			Fixed assets: Furniture       Less: Sold out Current assets: Bank (sold value)	60,000 (25,000)	35,000   15,000

 

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Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = 

ADJUSTMENT: 9B

Extracted data:

KK Enterprises has equipment Rs 40,000 on 1^st January 2020. Firm purchased additional equipment of $/₹/Rs 20,000 by cheque on 1^st July 2020. Depreciation charges 10% p.a. under SLM.

Required: (1) Journal entry; (2) Show in profit and loss account and balance sheet on December end

 

Journal Entry

Date	Particulars		LF	Amount	Amount
July 1	Equipment account               To Bank account (Being- equipment purchased by cheque)	Dr		20,000	20,000

 

P&L Account

Particulars		Amount	Particulars		Amount
To Depn on equipment		5,000

 

Balance Sheet

Liabilities		Amount	Assets		Amount
			Fixed assets: Equipment              Add: New equipment       Less: Depreciation	40,000 20,000 60,000 (5,000)	55,000

 

 Depreciation = 40,000 @ 10% + 20,000 @ 10% x 6/12 = 4,000 + 1,000 = 5,000

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