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 |
A company can distribute some goods as free samples to the customers to promotion of business.
Free sample of products is distributed for getting feedback about taste and quality from the customers.
It provides information to the management of company to improve quality of product.
Sometimes organization can give goods as charity or donation for religious purpose, and social help (help at the time of floods, tsunami, earthquake etc).
Goods given as free sample, charity or donation is deducted from purchase of goods because it decreases purchase goods.
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =
ADJUSTMENT: 16A
ABC Manufacturing Company purchased goods worth $/₹/Rs 800,000 for the year. Out of them, product worth Rs 10,000 distributed as free sample during the year.
Required: Adjustment entry and ledgers
Journal Entries
Date |
Particulars |
|
LF |
Amount |
Amount |
|
Free sample (advertisement) account |
Dr |
|
10,000 |
|
|
To Purchase account |
|
|
|
10,000 |
|
(Being- goods distributed as free sample) |
|
|
|
|
|
|
|
|
|
|
Trading Account
Particulars |
|
Amount |
Particulars |
|
Amount |
To Purchase |
800,000 |
|
|
|
|
Less: Free sample |
(10,000) |
790,000 |
|
|
|
|
|
|
|
|
|
Profit and Loss Account
Particulars |
|
Amount |
Particulars |
|
Amount |
To Free sample (advertisement) |
|
10,000 |
|
|
|
|
|
|
|
|
|
#####
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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