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):
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 |
Most of bad debts are not recovered but sometimes few debtors can pay their due as organization has written off as bad debts account.
It is the received amount, which is written off as bad debts.
Whatever is recovered, it is transferred to a gain account.
It is known as bad debts recovered account.
Sometimes debtors can pay his due with interest and apology.
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =
ADJUSTMENT: 14A
Extracted information:
AL Traders paid Rs 25,000 as written off as bad debt last year and Rs 1,000 interest with apology.
Required: (a) Journal entry; (b) Show in profit and loss account; (c) Show in balance sheet
Journal Entry
Date |
Particulars |
|
LF |
Amount |
Amount |
|
Cash account |
Dr |
|
26,000 |
|
|
To Bad debts recovered account |
|
|
|
25,000 |
|
To Interest received account |
|
|
|
1,000 |
|
(Being- cash received written off as bad debts with interest) |
|
|
|
|
|
|
|
|
|
|
Profit and Loss Account
Particulars |
|
Amount |
Particulars |
|
Amount |
|
|
|
By Bad debt recovered |
|
25,000 |
|
|
|
By Interest received |
|
1,000 |
|
|
|
|
|
|
Balance Sheet
Liabilities |
Amount |
Assets |
|
Amount |
|
|
Current assets: |
|
|
|
|
Cash |
|
26,000 |
|
|
|
|
|
#####
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 |
#####
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