Adjustment in Final Accounts: Outstanding Expenses
Arjun EP
Adjustment 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 IN 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 |
Outstanding Expense
Outstanding is also called due, payable, accrued, owing expenses or to be paid.
These expenses are incurred in the business but not yet paid.
These are to be considered as expenses.
Some examples are outstanding salary, outstanding interest, outstanding rent, outstanding wages etc.
It is debited in profit and loss account and is shown in liabilities side of balance sheet.
ADJUSTMENT: 5A
Extracted Trail Balance
|
Particulars |
Debit |
Credit |
|
Salary |
Nil |
|
|
|
|
|
Additional information:
Salary payable Rs 60,000
Required: (1) Journal entry; (2) Show in profit and loss account and balance sheet
SOLUTION
Journal Entry
|
Date |
Particulars |
|
LF |
Amount |
Amount |
|
|
Salary account |
Dr |
|
60,000 |
|
|
|
To Outstanding salary account |
|
|
|
60,000 |
|
|
(Being- salary payable or due) |
|
|
|
|
P&L Account
|
Particulars |
|
Amount |
Particulars |
|
Amount |
|
To Salary |
Nil |
|
By Closing stock |
|
230,000 |
|
Outstanding salary |
+60,000 |
60,000 |
|
|
|
|
|
|
|
|
|
|
Balance Sheet
|
Liabilities |
|
Amount |
Assets |
|
Amount |
|
Current liabilities: |
|
|
|
|
|
|
Outstanding salary |
|
60,000 |
|
|
|
#####
|
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: 5B
Extracted Trail Balance
|
Particulars |
Debit |
Credit |
|
Wages |
125,000 |
|
|
|
|
|
Additional information:
Wage payable Rs 20,000.
Required: (1) Journal entry; (2) Show in profit and loss account and balance sheet
Journal Entry
|
Date |
Particulars |
|
LF |
Amount |
Amount |
|
|
Wages account |
Dr |
|
20,000 |
|
|
|
To Outstanding wages account |
|
|
|
20,000 |
|
|
(Being- wages payable) |
|
|
|
|
Trading Account
|
Particulars |
|
Amount |
Particulars |
|
Amount |
|
To Wages |
125,000 |
|
|
|
|
|
Add: Outstanding wages |
+20,000 |
145,000 |
|
|
|
|
|
|
|
|
|
|
Balance Sheet
|
Liabilities |
|
Amount |
Assets |
|
Amount |
|
Current liabilities: |
|
|
|
|
|
|
Outstanding wages |
|
20,000 |
|
|
|
|
|
|
|
|
|
|
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