Adjustments in Final Accounts

Outstanding Expenses
• Case let:
Expense Incurred
– A private business enterprise disburses
Cash not paid
salary to its staff on the fifth day of the
next month. The monthly salary is Rs.
30,000. Pass an adjusting journal entry
and show its effect in Final Accounts
 Prepaid Expenses
• Case let:
– A firm pays Expense not Incurred
insurance premium Rs.
3,600 on June 1st Cashevery
Paid year. The
accounting period is from Jan-Dec.
Pass an adjusting journal entry and
show its effect in Final Accounts
 Accrued Income
• Case let:
– A business firmIncome Earned
owns Rs. 20,000, 12%
debentures Cash
on not Received
which interest is
receivable on Sep 30th and March 31st
The interest was received only on Sep
30th. Show the effect on Final Accounts
 Advance Income
• Case let:
Income
– A social service not Earnedreceives
organization
Cash Received
subscription from its members Rs.
30,000 of which Rs. 3,000 relates to
the next accounting year. Show the
effect on Final Accounts.
 Depreciation of Fixed Assets
• Case let:
The following balances have been extracted from
the trial balance of Balaji & Co.:
– Plant & Machinery Rs. 1,00,000
– Furniture Rs. 15,000
– Building Rs. 5,00,000
Depreciation is to be charged @ 10% on Plant &
Machinery, 20% on Furniture and 2% on Building.
Show the effect on Final Accounts.
 Bad Debts - 1
• Case let:
– Mr. Dilip a debtor for Rs. 25,000 is
declared insolvent. Debtors appear in
the Trial Balance at Rs. 3,00,000
(including Dilip’s debt). Accounting
year is from Jan-Dec. Show effect on
Final Accounts
 Bad Debts - 2
• Case let:
– Following is the trial balance extract as on 31st March 2011:

Particulars Debit Credit

Sundry Debtors 1,10,000 -
Bad Debts 7,500 -

Additional Information:
1. After making the trial balance it was brought to
knowledge that one of the debtors has become insolvent.
Rs. 10,000 was pending from him.
2. A Provision of 5% for bad and Doubtful debts is desired