Bonus to Employees Adjustment in Final Accounts
Arjun EP
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 to employees and retirement benefit Create reserve (general reserve and capital reserve) Goods sold on sale or return basis Hidden adjustment: (a) Interest on loan or debenture (b) Interest on investment (c) Monthly rent and salary |
Bonus to Employees and Retirement Benefit
Bonus and retirement benefit is the incentive.
It is provided to employees to encourage their better performance.
Bonus is provided as allowance to the employees on the basis of profit of the company.
Besides bonus, limited company and some private limited company provide retirement benefit such as gratuity and provident fund to the employees.
Bonus and retirement benefit is debited in profit and loss.
If such amount is paid, it is deducted from cash otherwise is shown in liability side of balance sheet.
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =
ADJUSTMENT: 15
Additional information:
· Bonus allowed to employees Rs 160,000
Required: (a) Show in profit and loss account; (b) Show in balance sheet
SOLUTION:
Journal Entries
|
Date |
Particulars |
|
LF |
Amount |
Amount |
|
|
Bonus to employee account (P&L) To Provision for bonus [Being- bonus allowed to (provision) to employee] |
Dr |
|
160,000
|
160,000
|
Profit and Loss Account
|
Particulars |
|
Amount |
Particulars |
Amount |
|
To Bonus to employees
|
|
160,000 |
|
|
Balance Sheet
|
Liabilities |
Amount |
Assets |
|
Amount |
|
Provision: Provision for bonus
|
160,000 |
|
|
|
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