ADJUSTMENTS

AT THE END OF ACCOUNTING PERIOD THE STOCK LYING IN STORES IS CALLED

CLOSING STOCK .IT IS ADJUSTED AS FOLLOWS:
1. CLOSING STOCK A/C DR. 30000
TO PROFIT AND LOSS A/C 30000

IN P&L A/C :RECODED IN THE CREDIT SIDE

IN BALANCESHEET :ASSETS SIDE.

2. OUTSTANDING LIABILITIES
ANY EXPERIENCE WHICH INCURRED DURING THE PARTICULAR
ACCOUNTING PERIOD BUT COULD NOT PAID IS SUBSEQUENTLY PAID AFTER
THE ACCOUNTING PERIOD IS OVER. THIS IS TERMED AS OUTSTANDING
LIABILITIES
THE JOURNAL ENTRY WILL BE:
CONCERNED EXPENDITURE A/C DR
TO OUTSTANDING EXPENSES A/C

IN P/L A/C CONCERNED EXPENDITURE WILL BE SHOWN IN EXPENDITURE

SIDE
IN BALANCESHEET:OUTSTANDING LIABILITIES WILL BE SHOWN AS A
LIABILITY(PERSONAL A/C)
IF OUTSTANDING LIABILITIES IS LOCATED IN TRIAL BALANCE ,NO FURTHER
ENTRY IS REQUIRED TO BE PASSED.
EXAMPLES: OUTSTANIDNG SALARIES RS.60000 PERTAINING TO THE
MONTH OF MARCH 16 WAS PERIOD IN OCT.16
SALARIES A/C DR.60000
TO OUTSTANDING LIABILITIES A/C 60000

PREPAID EXPENSES
THESE ARE THE EXPENSES WHICH ARE PAID IN ADVANCE IN
ADJUTMENT.THE CONCERNED EXPENDITURE IS REDUCED TO THE PERIOD
OF ACCOPUNTING AND REST IS SHOWN AS AN ASSET
PREPAID EXPENSES A/C DR
TO CONCERNED EXPENSES A/C

EXAMPLE: A FIRM HAS PAID INSURANCE PREMIUM OF RS. 12000 FOR THE
PERIOD 1 JULY 2015 TO 30-06-2016.THE ACCOUNTING YEAR IS 2015-
16.PASS ADJUSTMENTS ENTRY IN FINAL ACCOUNTS OF 2015-16.THE
ACCOUNTING PERIOD 15-16:TOTAL MONTHS COVERED
JULY-MARCH=9 MONTHS=9000
INSURANCE COVER FOR 2016-17 APRIL 16-JUNE 16=3 MONTHS =RS 3000
ENTRY: PREPAID INSURANCE A/C DR. 3000
TO INSURANCE A/C 3000
PROFIT & LOSS A/C :CONCERNED EXPENDITURE IS CREDITED
BALANCESHEET:SHOWN IN THE ASSET SIDE

ACCRUED INCOME
INCOME WHICH IS EARNED BUT NOT RECEIVED DURING A FINANCIAL YEAR
IS CALLED ACCRUED INCOME FOR THE PREVIOUS YEAR I.E. YEAR IN WHICH
IT WAS NOT RECEIVED.

PRIYA LTD. OWNS 13% DEBENTURES OF RS. 100000/- THE INTERST IS

RECIEVES ON 30-06-OF EACH YEAR. CALCULATE THE ACCRUED INCOME
FOR THE YEAR 2016-17 WHEN ITS WAS RECIEVESD ON 30-06-2017
INTEREST PERIOD: 1.7.2016-30.06.2017
AMOUNT:RS 13000/-
PERIOD 2016-17 1.7.2016-31.3.017=9 MONTHS
17-18 1.4.2017-30.06.2017=3 MONTHS
ACCRUED INCOME PERTAINING TO 2016-17 RECIEVABLES DURING 2017-18
=(13000*9)/12=9750/-
ACCUED INTEREST A/C DR. 9750
TO INTEREST A/C 9750

IN PROFIT AND LOSS ACCOUNT

ADD: THE ACCRUED INTEREST ALONG WITH THE INTEREST RECEIVED

BAD DEBTS
BAD DEBTS ARE PART OF DUES RELATED TO CREDIT SALES WHICH IS NOT
RECEIVED . IT MAY BE ON ACCOUNT OF BANKRUPTCY INSOLVENCY
THE ENTRY IN THE BOOK OF SELLER IS:
BAD DEBTS A/C DR.
TO SUNDRY DEBTOR A/C

PROVISION FOR BAD AND DOUBTFUL DEBTS:

IF DEBTORS ARE NOT ABLE TO HAVE THE ENTIRE DEBT AND THE
ORGANISATION HAS SUSTAINED A LOSS IN THE YEAR IN THAT CASE THE
FINANCIAL STATEMENTS FAIL TO GIVE THE TRUE VIEW.
IN ORDER TO COPE UP WITH THE SITUATION WE CAN FIX AN ARBITRARY
FIGURE.THE YEARS PROFIT ARE REDUCED BY THE NEXT YEAR ANU
AMOUNT WHICH IS TO BE WRITTEN OFF WILL BE MET OUT OF THIS
PROVISION
P/L A/C DR.
TO PROVISION FOR BAD & DOUBTFUL DEBTS A/C
THIS PROVISION WILL APPEAR IN THE BALANCESHEET .NEXT YEAR THE
BAD DEBT WILL NOT BE DEBITED TO P&L A/C BUT PROVISION FOR BAD
AND DOUBTFUL DEBTS A/C

CASE 1.
SUPPOSE THE PROVISION FOR BAD AND DOUBTFUL DEBTS ACCOUNT FOR
THE YEAR 2014-15 IS RS.5000/-
DURING 2014-15 IS RS.5000/-
DURING 2015-16 A SUM OF RS 4300/-IS THE AMOUNT OF BAD DEBT
THE PROVISION FOR BAD DEBT FOR THE YEAR 2016-17 IS REQUIRED TO
BE FIXED AS RS. 6500/-THE ADJUSTMENTS WILL BE AS FOLLOWS:

PROVISION FOR BAD & DOUBTFUL DEBTS A/C 2016-17

TO BAD 4300 BY OPENING 5000
DEBTS A/C BALANCE

TO 6500
BALANCE 5800
C/F BY P&L A/C
(BALANCE)

10800 10800

WORKING NOTE: PROVISION FOR BAD AND DOUBTFUL DEBTS TO BE

MAINTAINED RS. 6500
ADD: BAD DEBT DURING THE YEAR
RS 4300
TOTAL
10800

LESS: OLD BALANCE OF EXISTING PROVISION.

5000

CASE 2:
PROVISION FOR BAD DEBTS (2014-15) RS. 15000
BAD DEBTS DURING THE YEAR 15-16 RS.6000
PROVISION FOR BAD DEBTS REQUIRED FOR 15 16 RS 7000

PROVISION FOR BAD AND DOUBTFUL DEBTS A/C

TO BAD 6000 BY PROVISION 15000

DEBTS 7000 FOR BAD DEBTS
TO
PROVISION
FOR BAD
AND 2000
DOUBTFUL
DEBTS 15000 15000
TO P&L A/C

TOTAL

WORKING NOTE :PROVISION FOR BAD AND DOUBTFUL DEBTS TO BE

MAINTAINED 7000
 ADD: BAD DEBTS.
6000
TOTAL13000
BY P&L A/C (CREDIT BAL.) 15000-13000=2000