Adjustments in Final Accounts: Bad Debts Recovered

Arjun EP

Published on: September 26, 2020

Adjustments in Final Accounts

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

Balance Sheet

#####

Click on link for YouTube videos
Share (Accounting for Share)	http://tiny.cc/889jkz
Share in Nepali	http://tiny.cc/k99jkz
Debentures	http://tiny.cc/yeakkz
Final Account: Class 12	http://tiny.cc/e89jkz
Final Account in Nepali	http://tiny.cc/w89jkz
Work Sheet	http://tiny.cc/579jkz
Ratio Analysis (Accounting Ratio)	http://tiny.cc/4fakkz
Fund Flow Statement	http://tiny.cc/wiakkz
Cash Flow Statement	http://tiny.cc/8gakkz
Theory Accounting Xii	http://tiny.cc/nfakkz
Theory: Cost Accounting	http://tiny.cc/tfakkz
Cost Accounting	http://tiny.cc/p29jkz
LIFO−FIFO	http://tiny.cc/dgakkz
Cost Sheet, Unit Costing	http://tiny.cc/w49jkz
Cost Reconciliation Statement	http://tiny.cc/829jkz