Prepaid Expenses Adjustment in Final Accounts

 

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):  

 

Major Adjustments in Final Accounts

Closing stock Outstanding expenses Prepaid expenses Accrued revenue  or income Unearned or prepaid revenue 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 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

 

Prepaid Expenses

Prepaid means paid in advance.

Sometime a person or business organization has to pay amount in advance to complete or get complete the work. 

It is also called as un-expired costs, which typically expire or get used up in the near future.

Some examples are prepaid rent, prepaid insurance and prepaid salaries etc.

Expenses paid for the future period are treated as current asset or advance till expenses incurred.

It is deducted from related entry and is shown in assets side of balance sheet.

ADJUSTMENT: 3A

Office rent paid Rs 36,000. Out of this, Rs 6,000 was for advance.

Required: (1) Journal entry; (2) Show in profit and loss account and balance sheet 

Journal Entry

Date	Particulars		LF	Amount	Amount
	Prepaid rent account           To Rent account (Being- rent paid in advance)	Dr		6,000	6,000

 

P&L Account

Particulars		Amount	Particulars		Amount
To Rent paid       Less: Prepaid	36,000 (6,000)	60,000

 

Balance Sheet

Liabilities		Amount	Assets		Amount
			Loan & Advance: Prepaid rent		6,000

###########

Click on link for YouTube videos

 

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

LEDGER http://tiny.cc/haakkz

SUBSIDIARY BOOK http://tiny.cc/399jkz

CASH BOOK http://tiny.cc/889jkz

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

 

###########

ADJUSTMENT: 3B

Out of advance commission paid of Rs 50,000 expired this year Rs 30,000.

Required: (1) Journal entry; (2) Show in profit and loss account and balance sheet 

Journal Entry

Date	Particulars		LF	Amount	Amount
	Advance commission expired account           To Advance commission account (Being- advance commission expired)	Dr		30,000	30,000

 

P&L Account

Particulars		Amount	Particulars		Amount
To Advance comm. expired		30,000

 

Balance Sheet

Liabilities		Amount	Assets		Amount
			Loan & Advance: Advance commission     Less: Expired	50,000 (30,000)	20,000

 

***********

Thank you for investing your time.

Please comment on article.

You can help me by sharing this article at your social media platform.

 

Jay Google, Jay YouTube, Jay Social Media

जय गूगल, जय युट्युब, जय सोशल मीडिया