Adjustment in Final Accounts: Accrued Income
Arjun EP
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 OF FINAL ACCOUNTS:
|
1 |
Dividend |
13 |
Bad debts, provision and discount |
|
2 |
Transfer to reserve and fund |
14 |
Recovery of bad debts |
|
3 |
Adjustment of tax |
15 |
Goods loss by fire and insurance claim |
|
4 |
Closing stock |
16 |
Goods distribute as free sample |
|
5 |
Outstanding expenses |
17 |
Manager’s commission |
|
6 |
Prepaid expenses |
18 |
Bonus or pension to employees |
|
7 |
Accrued revenue or income |
19 |
Create reserve or fund |
|
8 |
Unearned or prepaid revenue |
20 |
Goods sold on sale or return basis |
|
9 |
Depreciation on assets |
21 |
Hidden adjustment: |
|
10 |
Appreciation on assets |
|
(a) Interest on loan or debenture |
|
11 |
Written off or amortized |
|
(b) Interest on investment |
|
12 |
Purchase or sale of fixed assets |
|
(c) Monthly rent and salary |
Accrued Income or Income Receivable
Accrued revenue is earned but not received.
It is also known as income receivable.
It is assume to receive in future.
It should be considered as receivable income for the year and recorded in asset.
It is based on accrual system of accounting.
The adjusting entry takes the following form:
ADJUSTMENT: 7A
Extracted Trail Balance
|
Particulars |
Debit |
Credit |
|
Interest |
|
50,000 |
|
|
|
|
Additional information:
Accrued interest (interest still receivable) Rs 20,000.
Required: (1) Journal entry; (2) Show in profit and loss account and balance sheet
Journal Entry
|
Date |
Particulars |
|
LF |
Amount |
Amount |
|
|
Accrued interest account |
Dr |
|
20,000 |
|
|
|
To Interest earned account |
|
|
|
20,000 |
|
|
(Being- interest receivable) |
|
|
|
|
|
|
|
|
|
|
|
P&L Account
|
Particulars |
|
Amount |
Particulars |
|
Amount |
|
|
|
|
To Interest received |
50,000 |
|
|
|
|
|
Add: Accrued interest |
+20,000 |
70,000 |
|
|
|
|
|
|
|
Balance Sheet
|
Liabilities |
|
Amount |
Assets |
|
Amount |
|
|
|
|
Current assets: |
|
|
|
|
|
|
Accrued interest |
|
20,000 |
|
|
|
|
|
|
|
#####
|
Click on link for YouTube videos |
|
|
Share (Accounting for Share) |
|
|
Share in Nepali |
|
|
Debentures |
|
|
Final Account: Class 12 |
|
|
Final Account in Nepali |
|
|
Work Sheet |
|
|
Ratio Analysis (Accounting Ratio) |
|
|
Fund Flow Statement |
|
|
Cash Flow Statement |
|
|
Theory Accounting Xii |
|
|
Theory: Cost Accounting |
|
|
Cost Accounting |
|
|
LIFO−FIFO |
|
|
Cost Sheet, Unit Costing |
|
|
Cost Reconciliation Statement |
|
#####
ADJUSTMENT: 7B
Extracted Trail Balance
|
Particulars |
Debit |
Credit |
|
Commission received |
|
– |
|
|
|
|
Additional information:
Commission earned but not received Rs 26,325.
Required: (1) Journal entry; (2) Show in profit and loss account and balance sheet
Journal Entry
|
Date |
Particulars |
|
LF |
Amount |
Amount |
|
|
Accrued commission account |
Dr |
|
26,325 |
|
|
|
To Commission earned account |
|
|
|
26,325 |
|
|
(Being- commission earned but not received) |
|
|
|
|
|
|
|
|
|
|
|
P&L Account
|
Particulars |
|
Amount |
Particulars |
|
Amount |
|
|
|
|
To Commission |
Nil |
|
|
|
|
|
Add: Accrued commission |
26,325 |
26,325 |
|
|
|
|
|
|
|
Balance Sheet
|
Liabilities |
|
Amount |
Assets |
|
Amount |
|
|
|
|
Current assets: |
|
|
|
|
|
|
Accrued commission |
|
26,325 |
|
|
|
|
|
|
|
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