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प्रश्न
What are adjusting entries? Why are they necessary for preparing final accounts?
उत्तर
The adjusting entries are considered to be the entries which are made in the end of the accounting period to determine the true and the fair position of the business.
These are called as the adjusting entries as they are made out of the items in the trial balance.
The adjustments are made in the two places as per the adherence on the double-entry system if book keeping.
It is necessary to make the adjusting entries while preparing the final accounts as:
(i) It depicts the true and fair position and the performance of the business of the current year.
(ii) It eliminates the entries which were already made in the prior year or which have to be made in the forthcoming years.
(iii) In case of the omission of any entries while the process of recording, the adjusting entries for the same are passed in the end of the accounting period.
(iv) After going through all the accounts, provision is created in the year-end whenever necessary.
APPEARS IN
संबंधित प्रश्न
Why is it necessary to record the adjusting entries in the preparation of final accounts?
Prepare a trading and profit and loss account for the year ending December 31, 2017. from the balances extracted of M/s Rahul Sons. Also prepare a balance sheet at the end of the year.
| Account Title | Amount ₹ |
Account Title | Amount ₹ |
| Stock | 50,000 | Sales | 1,80,000 |
| Wages | 3,000 | Purchases return | 2,000 |
| Salary | 8,000 | Discount received | 500 |
| Purchases | 1,75,000 | Provision for doubtful debts | 2,500 |
| Sales return | 3,000 | Capital | 3,00,000 |
| Sundry Debtors | 82,000 | Bills payable | 22,000 |
| Discount allowed | 1,000 | Commission received | 4,000 |
| Insurance | 3,200 | Rent | 6,000 |
| Rent Rates and Taxes | 4,300 | Loan | 34,800 |
| Fixtures and fittings | 20,000 | ||
| Trade expenses | 1,500 | ||
| Bad debts | 2,000 | ||
| Drawings | 32,000 | ||
| Repair and | 1,600 | ||
| renewals | |||
| Travelling | 4,200 | ||
| expenses | |||
| Postage | 300 | ||
| Telegram | 200 | ||
| expenses | |||
| Legal fees | 500 | ||
| Bills receivable | 50,000 | ||
| Building | 1,10,000 | ||
| 5,51,800 | 5,51,800 |
Adjustments
1. Commission received in advance ₹ 1,000.
2. Rent receivable ₹ 2,000.
3. Salary outstanding ₹ 1,000 and insurance prepaid ₹ 800.
4. Further bad debts ₹ 1,000 and provision for doubtful debts @ 5% on debtors and discount on debtors @ 2%.
5. Closing stock ₹ 32,000.
6. Depreciation on building @ 6% p.a.
Prepare a trading and profit and loss account of M/s Green Club Ltd. for the year ending March 31, 2017. from the following figures taken from his trial balance:
| Account Title | Amount ₹ |
Account Title | Amount ₹ |
| Opening stock | 35,000 | Sales | 2,50,000 |
| Purchases | 1,25,000 | Purchase return | 6,000 |
| Return inwards | 25,000 | Creditors | 10,000 |
| Postage and Telegram | 600 | Bills payable | 20,000 |
| Salary | 12,300 | Discount | 1,000 |
| Wages | 3,000 | Provision for bad debts | 4,500 |
| Rent and Rates | 1,000 | Interest received | 5,400 |
| Packing and Transport | 500 | Capital | 75,000 |
| General expense | 400 | ||
| Insurance | 4,000 | ||
| Debtors | 50,000 | ||
| Cash in hand | 20,000 | ||
| Cash at bank | 40,000 | ||
| Machinery | 20,000 | ||
| Lighting and Heating |
5,000 | ||
| Discount | 3,500 | ||
| Bad debts | 3,500 | ||
| Investment | 23,100 | ||
| 3,71,900 | 3,71,900 |
Adjustments:
- Depreciation charged on machinery @ 5% p.a.
- Further bad debts ₹ 1,500, discount on debtors @ 5% and make a provision on debtors @ 6%.
- Wages prepaid ₹ 1,000.
- Interest on investment @ 5% p.a.
- Closing stock ₹ 10,000.
The following balances has been extracted from the trial of M/s Runway Shine Ltd. Prepare a trading and profit and loss account and a balance sheet as on March 31, 2017.
| Account Title | Amount ₹ |
Account Title | Amount ₹ |
| Purchases | 1,50,000 | Sales | 2,50,000 |
| Opening stock | 50,000 | Return outwards | 4,500 |
| Return inwards | 2,000 | Interest received | 3,500 |
| Carriage inwards | 4,500 | Discount received | 400 |
| Cash in hand | 77,800 | Creditors | 1,25,000 |
| Cash at bank | 60,800 | Bill payable | 6,040 |
| Wages | 2,400 | Capital | 1,00,000 |
| Printing and | 4,500 | ||
| Stationery | |||
| Discount | 400 | ||
| Bad debts | 1,500 | ||
| Insurance | 2,500 | ||
| Investment | 32,000 | ||
| Debtors | 53,000 | ||
| Bills receivable | 20,000 | ||
| Postage and | 400 | ||
| Telegraph | |||
| Commission | 200 | ||
| Interest | 1,000 | ||
| Repair | 440 | ||
| Lighting Charges | 500 | ||
| Telephone | 100 | ||
| charges | |||
| Carriage outward | 400 | ||
| Motor car | 25,000 | ||
| 4,89,440 | 4,89,440 |
Adjustments
1. Further bad debts ₹ 1,000. Discount on debtors ₹ 500 and make a provision on debtors @ 5%.
2. Interest received on investment @ 5%.
3. Wages and interest outstanding ₹ 100 and ₹ 200 respectively.
4. Depreciation charged on motor car @ 5% p.a.
5. Closing Stock ₹ 32,500.
From the following information prepare trading and profit and loss account of M/s Indian sports house for the year ending March 31, 2017.
|
Account Title |
Amount |
Account Title |
Amount |
|
Drawings |
20,000 |
Capital |
2,00,000 |
|
Sundry debtors |
80,000 |
Return outwards |
2,000 |
|
Bad debts |
1,000 |
Bank overdraft |
12,000 |
|
Trade Expenses |
2,400 |
Provision for bad debts |
4,000 |
|
Printing and Stationery |
2,000 |
Sundry creditors |
60,000 |
|
Rent Rates and Taxes |
5,000 |
Bills payable |
15,400 |
|
Freight |
4,000 |
Sales |
2,76,000 |
|
Return inwards |
7,000 |
||
|
Opening stock |
25,000 |
||
|
Purchases |
1,80,000 |
||
|
Furniture and Fixture |
20,000 |
||
|
Plant and Machinery |
1,00,000 |
||
|
Bills receivable |
14,000 |
||
|
Wages |
10,000 |
||
|
Cash in hand |
6,000 |
||
|
Discount allowed |
2,000 |
||
|
Investments |
40,000 |
||
|
Motor car |
51,000 |
||
|
5,69,400 |
5,69,400 |
Adjustments
1. Closing stock was ₹ 45,000.
2. Provision for doubtful debts is to be maintained @ 2% on debtors.
3. Depreciation charged on : furniture and fixture @ 5%, plant and Machinery @ 6% and motor car @ 10%.
4. A Machine of ₹ 30,000 was purchased on October 01, 2016.
5. The manager is entitle to a commission of @ 10% of the net profit after charging such commission.
Prepare the trading and profit and loss account and a balance sheet of M/s Shine Ltd. from the following particulars.
|
Account Title |
Amount |
Account Title |
Amount |
|
Sundry debtors |
1,00,000 |
Bills payable |
85,550 |
|
Bad debts |
3,000 |
Sundry creditors |
25,000 |
|
Trade expenses |
2,500 |
Provision for bad debts |
1,500 |
|
Printing and Stationary |
5,000 |
Return outwards |
4,500 |
|
Rent, Rates and Taxes |
3,450 |
Capital |
2,50,000 |
|
Freight |
2,250 |
Discount received |
3,500 |
|
Sales return |
6,000 |
Interest received |
11,260 |
|
Motor car |
25,000 |
Sales |
1,00,000 |
|
Opening stock |
75,550 |
||
|
Furniture and Fixture |
15,500 |
||
|
Purchases |
75,000 |
||
|
Drawings |
13,560 |
||
|
Investments |
65,500 |
||
|
Cash in hand |
36,000 |
||
|
Cash in bank |
53,000 |
||
|
4,81,310 |
4,81,310 |
Adjustments
1. Closing stock was valued ₹ 35,000.
2. Depreciation charged on furniture and fixture @ 5%.
3. Further bad debts ₹ 1,000. Make a provision for bad debts @ 5% on sundry debtors.
4. Depreciation charged on motor car @ 10%.
5. Interest on drawing @ 6%.
6. Rent, rates and taxes was outstanding ₹ 200.
7. Discount on debtors 2%.
Following balances have been extracted from the trial balance of M/s Keshav Electronics Ltd. You are required to prepare the trading and profit and loss account and a balance sheet as on March 31, 2017.
|
Account Title |
Amount |
Account Title |
Amount |
|
Opening stock |
2,26,000 |
Sales |
6,80,000 |
|
Purchases |
4,40,000 |
Return outwards |
15,000 |
|
Drawings |
75,000 |
Creditors |
50,000 |
|
Buildings |
1,00,000 |
Bills payable |
63,700 |
|
Motor van |
30,000 |
Interest received |
20,000 |
|
Freight inwards |
3,400 |
Capital |
3,50,000 |
|
Sales return |
10,000 |
||
|
Trade expense |
3,300 |
||
|
Heat and Power |
8,000 |
||
|
Salary and Wages |
5,000 |
||
|
Legal expense |
3,000 |
||
|
Postage and Telegram |
1,000 |
||
|
Bad debts |
6,500 |
||
|
Cash in hand |
79,000 |
||
|
Cash at bank |
98,000 |
||
|
Sundry debtors |
25,000 |
||
|
Investments |
40,000 |
||
|
Insurance |
3,500 |
||
|
Machinery |
22,000 |
||
|
11,78,700 |
11,78,700 |
The following additional information is available :
1. Stock on December 31, 2017 was ₹ 30,000.
2. Depreciation is to be charged on building at 5% and motor van at 10%.
3. Provision for doubtful debts is to be maintained at 5% on Sundry Debtors.
4. Unexpired insurance was ₹ 600.
5. The Manager is entitled to a commission @ 5% on net profit before charging such commission.
From the following balances extracted from the books of Raga Ltd. Prepare a trading and profit and loss account for the year ended March 31, 20117 and a balance sheet as on that date.
|
Account Title |
Amount |
Account Title |
Amount |
|
Drawings |
20,000 |
Sales |
2,20,000 |
|
Land and Buildings |
12,000 |
Capital |
1,01,110 |
|
Plant and Machinery |
40,000 |
Discount |
1,260 |
|
Carriage inwards |
100 |
Apprentice premium |
5,230 |
|
Wages |
500 |
Bills payable |
1,28,870 |
|
Salary |
2,000 |
Purchases return |
10,000 |
|
Sales return |
200 |
||
|
Bank charges |
200 |
||
|
Coal, Gas and Water |
1,200 |
||
|
Purchases |
1,50,000 |
||
|
Trade Expenses |
3,800 |
||
|
Stock (Opening) |
76,800 |
||
|
Cash at bank |
50,000 |
||
|
Rates and Taxes |
870 |
||
|
Bills receivable |
24,500 |
||
|
Sundry debtors |
54,300 |
||
|
Cash in hand |
30,000 |
||
|
4,66,470 |
4,66,470 |
The additional information is as under:
1. Closing stock was valued at the end of the year Rs, 20,000.
2. Depreciation on plant and machinery charged at 5% and land and building at 10%.
3. Discount on debtors at 3%.
4. Make a provision at 5% on debtors for doubtful debts.
5. Salary outstanding was Rs 100 and Wages prepaid was Rs 40.
6. The manager is entitled a commission of 5% on net profit after charging such commission.
From the following balances of M/s Jyoti Exports, prepare trading and profit and loss account for the year ended March 31, 2017 and balance sheet as on this date.
|
Account Title |
Debit |
Account Title |
Credit |
|
Sundry debtors |
9,600 |
Sundry creditors |
2,500 |
|
Opening stock |
22,800 |
Sales |
72,670 |
|
Purchases |
34,800 |
Purchases returns |
2,430 |
|
Carriage inwards |
450 |
Bills payable |
15,600 |
|
Wages |
1,770 |
Capital |
42,000 |
|
Office rent |
820 |
||
|
Insurance |
1,440 |
||
|
Factory rent |
390 |
||
|
Cleaning charges |
940 |
||
|
Salary |
1,590 |
||
|
Building |
24,000 |
||
|
Plant and Machinery |
3,600 |
||
|
Cash in hand |
2,160 |
||
|
Gas and Water |
240 |
||
|
Octroi |
60 |
||
|
Furniture |
20,540 |
||
|
Patents |
10,000 |
||
|
1,35,200 |
1,35,200 |
Closing stock Rs 10,000.
1. To provision for doubtful debts is to be maintained at 5 per cent on sundry debtors.
2. Wages amounting to Rs 500 and salary amounting to Rs 350 are outstanding.
3. Factory rent prepaid Rs 100.
4. Depreciation charged on Plant and Machinery @ 5% and Building @ 10%.
5. Outstanding insurance Rs 100.
The following balances have been extracted from the books of M/s Green House for the year ended March 31, 2017, prepare trading and profit and loss account and balance sheet as on this date.
|
Account Title |
Amount |
Account Title |
Amount |
|
Purchases |
80,000 |
Capital |
2,10,000 |
|
Bank balance |
11,000 |
Bills payable |
6,500 |
|
Wages |
34,000 |
Sales |
2,00,000 |
|
Debtors |
70,300 |
Creditors |
50,000 |
|
Cash in hand |
1,200 |
Return outwards |
4,000 |
|
Legal expenses |
4,000 |
||
|
Building |
60,000 |
||
|
Machinery |
120,000 |
||
|
Bills receivable |
7,000 |
||
|
Office expenses |
3,000 |
||
|
Opening stock |
45,000 |
||
|
Gas and fuel |
2,700 |
||
|
Freight and Carriage |
3,500 |
||
|
Factory lighting |
5,000 |
||
|
Office furniture |
5,000 |
||
|
Patent right |
18,800 |
||
|
4,70,500 |
4,70,500 |
Adjustments :
(a) Machinery is depreciated at 10% and buildings depreciated at 6%.
(b) Interest on capital @ 4%.
(c) Outstanding wages Rs 50.
(d) Closing stock Rs 50,000
From the following balances extracted from the book of M/s Manju Chawla on March 31, 2017. You are requested to prepare the trading and profit and loss account and a balance sheet as on this date.
|
Account Title |
Amount |
Amount |
|
Opening stock |
10,000 |
|
|
Purchases and Sales |
40,000 |
80,000 |
|
Returns |
200 |
600 |
|
Wages |
6,000 |
|
|
Dock and cleaning charges |
4,000 |
|
|
Lighting |
500 |
|
|
Misc. Income |
6,000 |
|
|
Rent |
2,000 |
|
|
Capital |
40,000 |
|
|
Drawings |
2,000 |
|
|
Debtors and Creditors |
6,000 |
7,000 |
|
Cash |
3,000 |
|
|
Investment |
6,000 |
|
|
Patent |
4,000 |
|
|
Land and Machinery |
43,000 |
|
|
Donations and Charity |
600 |
|
|
Sales tax collected |
1,000 |
|
|
Furniture |
11,300 |
|
|
1,36,600 |
1,36,600 |
Closing stock was Rs 2,000.
(a) Interest on drawings @ 7% and interest on capital @ 5%.
(b) Land and Machinery is depreciated at 5%.
(c) Interest on investment @ 6%.
(d) Unexpired rent Rs 100.
(e) Charge 5% depreciation on furniture.
The following balances were extracted from the books of M/s Panchsheel Garments on March 31, 2017.
|
Account Title |
Debit |
Account Title |
Credit |
| Opening stock | 16,000 |
Sales |
1,12,000 |
|
Purchases |
67,600 | Return outwards | 3,200 |
| Return Inwards | 4,600 |
Discount |
1,400 |
| Carriage inwards | 1,400 |
Bank overdraft |
10,000 |
| General expenses | 2,400 |
Commission |
1,800 |
|
Insurance |
4,000 |
Creditors |
16,000 |
| Scooter expenses | 200 |
Capital |
50,000 |
|
Salary |
8,800 |
||
| Cash in hand | 4,000 | ||
|
Scooter |
8,000 | ||
|
Furniture |
5,200 | ||
|
Buildings |
65,000 | ||
|
Debtors |
6,000 | ||
|
Wages |
1,200 | ||
| 1,94,400 |
1,94,400 |
Prepare the trading and profit and loss account for the year ended March 31, 2017 and a balance sheet as on that date.
(a) Unexpired insurance ₹ 1,000.
(b) Salary due but not paid ₹ 1,800.
(c) Wages outstanding ₹ 200.
(d) Interest on capital 5%.
(e) Scooter is depreciated @ 5%.
(f) Furniture is depreciated ₹ @ 10%.
(g) Closing stock was ₹ 15,000.
Prepare the trading and profit and loss account and balance sheet of M/s Control Device India on March 31, 2017 from the following balance as on that date.
|
Account Title |
Debit |
Credit |
|
Drawings and Capital |
19,530 |
67,500 |
|
Purchase and Sales |
45,000 |
1,12,500 |
|
Salary and Commission |
25,470 |
1,575 |
|
Carriage |
2,700 |
|
|
Plant and Machinery |
27,000 |
|
|
Furniture |
6,750 |
|
|
Opening stock |
42,300 |
|
|
Insurance premium |
2,700 |
|
|
Interest |
7,425 |
|
|
Bank overdraft |
24,660 |
|
|
Rent and Taxes |
2,160 |
|
|
Wages |
11,215 |
|
|
Returns |
2,385 |
1,440 |
|
Carriage outwards |
1,485 |
|
|
Debtors and Creditors |
36,000 |
58,500 |
|
General expenses |
6,975 |
|
|
Octroi |
530 |
|
|
Investment |
41,400 |
|
|
2,73,600 |
2,73,600 |
Closing stock was valued Rs 20,000.
(a) Interest on capital @ 10%.
(b) Interest on drawings @ 5%.
(c) Wages outstanding Rs 50.
(d) Outstanding salary Rs 20.
(e) Provide a depreciation @ 5% on plant and machinery.
(f) Make a 5% provision on debtors.
The following balances appeared in the trial balance of M/s Kapil Traders as on March 31, 2017
|
Rs |
|
|
Sundry debtors |
30,500 |
|
Bad debts |
500 |
|
Provision for |
2,000 |
The partners of the firm agreed to records the following adjustments in the books of the Firm: Further bad debts Rs.300. Maintain provision for bad debts 10%. Show the following adjustments in the bad debts account, provision account, debtors account, profit and loss account and balance sheet.
Prepare the bad debts account, provision for account, profit and loss account and balance sheet from the following information as on March 31, 2017
|
Rs |
|
|
Debtors |
80,000 |
|
Bad debts |
2,000 |
|
Provision for doubtful |
5,000 |
Adjustments:
Bad Debts Rs 500 Provision on Debtors @ 3%.
