Financial statement with

adjustments

Submitted to :palak bajaj

Submitted by :atul verma
 Interest on capital
• The proprietor invests money into the
business is termed as loan to business,if this
amount is not invested in business ,it would
than have Earned some interest outside,as
such the proprietor wants int. On capital

• Interest on capital a/c dr.

To capital a/c
INTEREST ON CAPITAL
EXAMPLE: Extract from TRIAL BALANCE
Name of account L.F. DEBIT CREDIT
capital 5,10,000

Adjustment
Charge 10,000 as interest on capital
Profit and loss account
Particular Amount Particular Amount
To interest on capital 10000

Balance sheet
Liabilities Amount Assets Amount
Capital 510000
+interest on capital 10000 5,20,000
 Interest on drawings
• Occasionally,the proprietor Withdraws cash or
goods for his personal use.such withdrawals
are termed as drawings.If the firm pays int. On
capital ,it is fully justified that It should also
charge for int. On drawings

• Drawings a/c dr.

To int. On drawings a/c
 INTEREST ON DRAWING
EXAMPLE: Extract from TRIAL BALANCE
Name of account L.F. DEBIT CREDIT
Capital a/c 5,00,000
Drawing A/C 80,000

Adjustment
Charge 3,000/- as interest on drawing
Profit and loss account
Particular Amount Particular Amount
By interest on drawing 3000

Balance sheet
Liabilities Amount Assets Amount
Capital 500000
-drawing 80000
420000
-interest on drawing 3000 417000
 Interest on loan
• Loan is a liability for the firm and int. On loan
is also expenses for firm If the amount of loan
is not paid by the firm the unpaid amount of
loan is treated as other outstanding Expenses
 INTEREST ON
Name of account
Loan from bank @12%p.a.
LOAN
EXAMPLE: Extract from TRIAL BALANCE
L.F. DEBIT
5,00,000
CREDIT

Adjustment

Interest on loan is due for the whole year.

Trading account
Particular Amount Particular Amount
To interest on loan 60000

Balance sheet
Liabilities Amount Assets Amount
Loan form bank 5,00,000
+outstanding interest 60,000 5,60,000
 Drawings in goods
• If the proprietor Of the business has taken
some goods for his personal use is called
drawings in goods

• Drawings a/c dr.

To purchase a/c
DRAWING IN GOODS
EXAMPLE: Extract from TRIAL BALANCE
Name of account L.F. DEBIT CREDIT
Purchase 1,10,000

Adjustment
 Goods worth 10,000/- were used by proprietor for personal use.

Trading account
Particular Amount Particular Amount
To purchase 110000
-drawing (10000) 100000

Balance sheet
Liabilities Amount Assets Amount
Capital 500000
-drawing (10000) 490000
Goods distributed as free samples
• Sometimes the Goods which the business
deals in Are distributed as free samples For
the purpose of advertisement of those goods

• Advertisement a/c dr.

To purchase a/c
 GOODS DISTRIBUTED AS FREE SAMPLE

EXAMPLE: Extract from TRIAL BALANCE

Name of account L.F. DEBIT CREDIT
Purchase 1,10,000

Adjustment
Goods worth 10,000/- were goods distributed as free
sample. Trading account
Particular Amount Particular Amount
To purchase 110000
-Free sample (10000) 100000

Profit and loss account

Particular Amount Particular Amount
To free sample 10000
 Charity in form of goods
• Occasionally the certain amount of goods are
given as charity

• Charity a/c dr.

to purchase a/c
👍Thank you 👍