Adjustments in Final Accounts: Goods Sold on Approval
Arjun EP
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):
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 |
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Click on link for YouTube videos |
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Share (Accounting for Share) |
|
|
Share in Nepali |
|
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Debentures |
|
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Final Account: Class 12 |
|
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Final Account in Nepali |
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Work Sheet |
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Ratio Analysis (Accounting Ratio) |
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Fund Flow Statement |
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Cash Flow Statement |
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Theory Accounting Xii |
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Theory: Cost Accounting |
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Cost Accounting |
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LIFO−FIFO |
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Cost Sheet, Unit Costing |
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Cost Reconciliation Statement |
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Goods Sold on Approval
It is also known as goods sold on sale or return basis.
Sometimes when company is new or new product is launched, vendor company can sales goods on sales or return basis.
This method is known on-approval.
Under this, method goods are distributed credit basis.
When goods are sold, money is paid; when goods are not sold it is returned to Vendor Company.
ADJUSTMENT: 20A
Extracted Trial Balance
|
Particulars |
Debit |
Credit |
|
|
Sales |
− |
800,000 |
|
|
Debtors |
150,000 |
|
|
|
|
|
|
|
Additional information:
Closing stock Rs 40,000
Goods cost value Rs 50,000 sold on sales or return basis for Rs 80,000.
Required: Show transaction in journal entry, trading account and balance sheet
SOLUTION
Journal Entry
|
Date |
Particulars |
|
LF |
Amount |
Amount |
|
|
Sales account (sales value) |
Dr |
|
80,000 |
|
|
|
Closing stock account (cost value) |
Dr |
|
50,000 |
|
|
|
To Debtors account (sales value) |
|
|
|
80,000 |
|
|
To Trading account (cost value) |
|
|
|
50,000 |
|
|
(Being- closing stock recorded) |
|
|
|
|
|
|
|
|
|
|
|
Trading Account
|
Particulars |
|
Amount |
Particulars |
|
Amount |
|
|
|
|
By Sales |
800,000 |
|
|
|
|
|
Less: Return |
Nil |
|
|
|
|
|
Less: On-approval |
(80,000) |
720,000 |
|
|
|
|
By Closing stock |
40,000 |
|
|
|
|
|
Add: On-approval |
50,000 |
90,000 |
|
|
|
|
|
|
|
Extracted Balance Sheet
|
Liabilities |
|
Amount |
Assets |
|
Amount |
|
|
|
|
Current assets: |
|
|
|
|
|
|
Debtors |
150,000 |
|
|
|
|
|
Less: On-approval |
(80,000) |
70,000 |
|
|
|
|
Closing stock |
40,000 |
|
|
|
|
|
Add: On-approval |
50,000 |
90,000 |
|
|
|
|
|
|
|
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