Adjustments given below trial balance must be adjusted for final account.
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):
Closing stock Outstanding expenses Prepaid expenses Accrued income or income receivable Advance income or unearned income Depreciation on assets Appreciation on assets Written off or amortized Purchase or sale of fixed assets Bad debts, provision and discount Bad debts recovered |
Goods loss by fire and insurance claim Goods distribute as free sample Manager’s commission Bonus or pension to employees Create reserve or fund Goods sold on sale or return basis Hidden adjustment: (a) Interest on loan or debenture (b) Interest on investment (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: 13
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 To Purchase account (Being- goods distributed as free sample)
|
Dr |
|
10,000
|
10,000
|
Trading Account
Particulars |
|
Amount |
Particulars |
|
Amount |
To Purchase Less: Free sample
|
800,000 (10,000) |
790,000
|
|
|
|
Profit and Loss Account
Particulars |
|
Amount |
Particulars |
|
Amount |
To Free sample (advt)
|
|
10,000 |
|
|
|
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ACCOUNTING EQUATION http://tiny.cc/c89jkz
BASIC JOURNAL ENTRIES IN NEPALI http://tiny.cc/uaakkz
BASIC JOURNAL ENTRIES http://tiny.cc/8aakkz
JOURNAL ENTRY AND LEDGER http://tiny.cc/caakkz
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SUBSIDIARY BOOK http://tiny.cc/399jkz
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TRIAL BALANCE & ADJUSTED TRIAL BALANCE http://tiny.cc/c59jkz
BANK RECONCILIATION STATEMENT (BRS) http://tiny.cc/q59jkz
DEPRECIATION http://tiny.cc/ugakkz
FINAL ACCOUNT: CLASS 11 http://tiny.cc/y89jkz
ADJUSTMENT IN FINAL ACCOUNT http://tiny.cc/keakkz
CAPITAL AND REVENUE http://tiny.cc/peakkz
SINGLE ENTRY SYSTEM http://tiny.cc/n19jkz
NON-PROFIT ORGANIZATION (NON-TRADING CONCERN http://tiny.cc/j09jkz
GOVERNMENT ACCOUNTING http://tiny.cc/hcakkz
GOSWARA VOUCHER (JOURNAL VOUCHER) http://tiny.cc/hcakkz
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