Written off Adjustment in Final Accounts
Arjun EP
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 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 |
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Amortized or Written off on Factious Assets
Depreciation is charged on tangible assets but Intangible assets are written off or amortized.
It affects profit and loss or revenue and expenditures of an organization.
It is non-cash expenses.
It is debited in profit and loss account.
Some intangible assets are preliminary expenses, underwriting commission, discount on issue of share or debentures, profit and loss debit balance etc.
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =
ADJUSTMENT: 8
Amortize preliminary expenses by 25% (value Rs 100,000)
Write off discount on debentures within 5 years (value Rs 50,000)
Required: (1) Journal entry; (2) Show in profit and loss account and balance sheet
Journal Entry
|
Date |
Particulars |
|
LF |
Amount |
Amount |
|
|
Amortize on preliminary expenses account To Preliminary expenses account (Being- preliminary expenses amortized 100,000 @25%) |
Dr
|
|
25,000 |
25,000 |
|
|
Discount on debentures written off account To Discount on debentures account (Being- discount on debentures written off 50,000÷ 5 years) |
Dr |
|
10,000 |
10,000 |
P&L Account
|
Particulars |
|
Amount |
Particulars |
|
Amount |
|
To Written off on: Preliminary expenses Discount on debentures |
25,000 +10,000 |
35,000
|
|
|
|
Balance Sheet
|
Liabilities |
|
Amount |
Assets |
|
Amount |
|
|
|
|
Miscellaneous expenditure:Preliminary expenses Less: Written off Discount on debentures Less: Written off
|
100,000 (25,000) 50,000 (10,000) |
75,000
40,000 |
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