DEPARTMENT OF TECHNICAL EDUCATION
ANDHRA PRADESH
Name : N.Sambaiah
Designation : Head of the section
Branch : DCCP
Institute : Suvr and SR GPW,
Ethamukkala.
Year : I year
Subject : Accountancy-I
Subject Code : CCP102
Topic : Final Accounts
Duration : 50 minutes
Sub Topic :preparation of final accounts
with adjustment.
Teaching Aids : PPT, animations
CCP102.141 1
Objectives
On completion of the period, student would be
able to
Prepare final accounts with adjustments
Understand the treatment of the adjustments
CCP102.141 2
Recap:
In the previous classes we have
discussed the following adjustments and
their treatment in the final accounts. They
are
1.outstanding expenses.
2.prepaid expenses.
3.income earned but not received.
4.income received in advance.
5.depreciation.
6.bad debts.
7.provision for doubtful debts etc.,
CCP102.141 3
Final accounts – solution -3
In the Books of Krishna & Company, Bombay
Journal entries for adjustments
Date particulars LF Debit Credit
Rs. Ps Rs. Ps
31-3-08 Stock on 31-3-08 account Dr 1,58,200
To Trading account 1,58,200
(Being closing stock taken in to
account)
----------------------------------------------
-do- Bad debts account Dr 5,400
To debit on account 5,400
(Being bad debts on debtors 5,400
P&L A/c
-do- Bad debts A/c 5,400
(being bad debts transferred to
P&L A/c)
CCP102.141 4
Final accounts – solution -3
In the Books of Krishna & Company, Bombay
Journal entries for adjustments
Date particulars LF Debit Credit
Rs. Ps Rs. Ps
31-3-08 Reserve for doubtful debts 3,600
To profit and loss account 3,600
(being additional reserve created)
31-3-08 Profit & Loss account Dr 9,000
To Interest on Bank loan account 9,000
(Being interest on bank loan)
-------------------------------------------------------
CCP102.141 5
Final accounts – solution -3.contd
Krishna & Company, Bombay
Trading account for the period ending 31-3-08
Dr Cr
Particulars amount Particulars Amount
Rs. Ps Rs. Ps
To Opening stock account 1,23,000 By Sales 3,50,150
To Purchases a/c. 2,35,400 Less: returns 37,600 3,12,550
Less: returns 15,500 2,19,900 By Closing stock 1,58,200
To Carriage inwards 4,600
To Gross profit (transferred 1,23,250
to profit and loss account)
------------- -------------
4,70,750 4,70,750
-------------- -------------
CCP102.141 6
Final accounts – solution -3.contd
Krishna & Company, Bombay
P & L account for the period ending 31-3-08
Dr Cr
Particulars amount Rs. Particulars Amount
Ps Rs. Ps
To Legal charges 1,950 By Gross profit 1,23,250
To General expenses 15,500 By discount 14,800
To Discount 17,500
To Salaries 73,600
To Interest on bank loan 9,000
To bad debts 5400
Add: bad debts 4500 By Net loss (transferred 17,300
9,900 to capital account)
---------
24,300
To Rates & taxes
To provision for bad debts
3,600
( 6000 – 2400) ------------
1,55,350 ------------------
------------- 1,54,350
------------------
CCP102.141 7
Final accounts – solution -3.contd
Krishna & Company, Bombay
Balance sheet as on 31-3-08
Dr Cr
Liabilities Amount Assets Amount
Rs. Ps Rs. Ps.
Capital 3,20,000 Plant & Machinery 95,000
Less: net loss 17,300 Buildings 85,000
------------- 3,02,700 Bills receivable 12,800
Creditors 70,000 Closing stock 1,58,200
Bills payable 36,000 Sundry debtors 1,24,500
less: bad debts 4,500
Bank Loan @ 10% 90,000
1,20,000
Add: outstanding int. 9,000
Less : Provision 6,000 1,14,000
------------ 99,000
Cash at bank 41,500
Cash in hand 1,200
--------------
---------------- 5,07,700
5,07,700 --------------
--------------
CCP102.141 8
Final accounts – solution -3.contd
Note:1 Reserve for doubtful debtors:
Trade debtors (in trial balance) = 1,24,500
Bad debts in adjustments 4,500
-------------
Trade debtors at present 1,20,000
Reserve to be required @ 5% = 1,20,000x5/100
= 6000
Old reserve available (in trial balance) = 2400
Additional reserve required:6000 – 2400= 3600
Note-2: In the balance sheet total reserve (old + new ) is to
be deducted from the debtors (1,20,000 – 6000) =
1,14,000
CCP102.141 9
Assignment- 4
Prepare Trading account, Profit and Loss account and Balance
Sheet from the following Trial Balance of Sairam of Rajamundry
as on 31-3-08.
Particulars debit credit
Rs. Ps Rs. Ps
Purchases 24,200
Furniture 2,600
Wages 4,500
Machinery 22,000
Opening stock 14,525
Sales returns 1,000
Debtors 10,600
Freight on purchases 400
Salaries 10,500
Freight on sales 600
Rent and taxes 1,000
CCP102.141 10
Assignment- 4 continued…
Particulars debit credit
Rs. Ps Rs. Ps
Cash at bank 19,000
Sales 71,600
Capital 25,000
Creditors 13,925
Purchase returns 400
-------------- --------------
1,10,925 1,10,925
-------------- --------------
Adjustments to be made:
10. Closing stock Rs. 16,400.
11. .Outstanding salaries 900.
3. Prepaid rent 450.
4. Provide reserve for doubtful debts @ 5% contd..
CCP102.141 11
Assignment- 4 continued…
1. Provide depreciation on machinery at 5%.
2. Calculate interest on capital at 5 percent.
CCP102.141 12
Treatment of new items appearing
in T.B
1. Freight on purchase: to be shown on the debit
side of trading A/c.
2. Freight on sales: to be shown on the debit side of
profit and loss A/c.
CCP102.141 13
Treatment of Adjustments
1.Closing stock:
To be shown on the credit side of trading
A/c.
To be shown on the assets side of B/c.
2.Outstanding salaries:
a) To be added to the salaries on the debit side
of trading A/c.
b) To be shown on the liabilities side of B/s.
CCP102.141 14
Treatment of Adjustments
3.Prepaid rent:
a) Deduct from rent on the debit side of profit and loss
A/c.
b) To be shown on the assets side of B/s.
4.Reserve for doubtful debits:
Calculate on the debtors and show
a) On the debit side of the profit and loss A/c.
b) Deduct from debtors on the assets side.
CCP102.141 15
Treatment of Adjustments (contd..)
5.Depretiation on machinery: calculate 5% on machinery
and
a) Shown on the debit side of profit and loss A/c.
b) Deduct the amount from machinery.
Note: Amount in balance sheet
6.Interest in capital: calculate the percentage on capital and
a) Show in the debit side of profit and loss A/c.
b) Add to the capital in the B/c.
CCP102.141 16
Assignment- 5
Prepare Trading account, Profit and Loss account and Balance
Sheet from the following information as on 31-3-08.
Purchases 2,40,000 Cash at bank 47,500
Return inwards 2,000 Sales 3,40,000
Carriage 2,600 Capital 1,25,000
Rent and taxes 4,500 Creditors 60,000
Stock 24,000 Return outwards 9,500
Debtors 76,000 Interest received 1,600
Salaries 32,000 Provision for 3,000
Wages 16,500 doubtful debts
Plant and machinery 76,000
Furniture 18,000 contd..
CCP102.141 17
Assignment- 5
Adjustments:
2. Closing stock 35,000
3. Depreciation plant & machinery at 10% and furniture
by 20%.
4. Provision for bad debts is to be maintained at 5%.
5. Outstanding rent Rs. 800
6. Rs.2000 is written of as bad debts.
7. Interest earned but not received 1000.
CCP102.141 18
Treatment of Adjustments:
1.Closing stock:
a) Trading A/c credit side.
b) Assets side of B/s.
2.Depreciation: calculate the percentage and
a) Debit side of profit and loss A/c.
b) Deduct from the abet on the abet side.
3.Interest earned but not received:
a) Sow on the credit side of profit and loss A/c.
b) Show on the assets side.
CCP102.141 19
Treatment of Adjustments:
4.Provision for bad debts : calculate the
percentage and compare with the existing
provision. It comes to Rs:3800
It is higher than the existing provision by Rs:800
(300—800)
a) Show Rs:700 on the debit side.
b) Deduct total provision from debtors on
assets side.
CCP102.141 20
Treatment of Adjustments (contd..)
5.Outstanding rent:
b) Add to rent on the debit side of profit and loss A/c.
c) Show on the liabilities side.
6.Bad debits:
e) Show on the debit side of profit and loss A/c.
f) Deduct from debtors in bank sheet.
CCP102.141 21
Summary:
We have seen adjustments like:
3. Closing stock.
4. Depreciation.
5. Outstanding incomes.
6. Additional bad debts.
7. Reserve given in T.B and in adjustments.
CCP102.141 22
Quiz:
1. All adjustments appear in final A/c at______.
b) Three places.
c) Two places.
d) Only one place.
CCP102.141 23
