Adjustments 5

8/4/2019 Adjustments 5

1/12

Special adjustments and theirSpecial adjustments and their

treatment in companystreatment in companys

Final AccountsFinal Accounts


2/12

Provision of Income TaxProvision of Income Tax

It is created for the Income Tax that may have toIt is created for the Income Tax that may have tobe paid next yearbe paid next year

TreatmentTreatment

P&LP&L ---------------------------------------- Dr. SideDr. Side

Balance SheetBalance Sheet ------------ LiabilityLiability

(Head)(Head) ProvisionProvision


3/12

Preliminary Expenses.Preliminary Expenses.Those expenses which incurred at the time ofThose expenses which incurred at the time of

incorporating business.incorporating business.

TreatmentTreatment

1.1. If it appears in Trial BalanceIf it appears in Trial Balance

Balance sheetBalance sheet ----------------------------Asset SideAsset Side

(Head) Miscellaneous Exp.(Head) Miscellaneous Exp.

2.Preliminary Expenses Written Off2.Preliminary Expenses Written Off

(If it is given in adjustments)(If it is given in adjustments)

P&L A/cP&L A/c ------------------------------------ Dr. Side (written off amount)Dr. Side (written off amount)

Balance SheetBalance Sheet -------------------- Liability SideLiability Side

(Head) Miscellaneous Exp.(Head) Miscellaneous Exp.

(Amount should be deducted from Preliminary exp.)(Amount should be deducted from Preliminary exp.)


4/12

DividendDividendThe portion of profits of a companyThe portion of profits of a company

distributed among the shareholdersdistributed among the shareholders ..

TreatmentTreatment

1.1.If it appears in Trial BalanceIf it appears in Trial Balance

P&L Appro. A/cP&L Appro. A/c -------------------- Dr. SideDr. Side

2.2.If it is given in adjustments.If it is given in adjustments.

P&L Appro. A/cP&L Appro. A/c -------------------- Dr SideDr Side

Balance SheetBalance Sheet -------------------- LiabilitiesLiabilities

(Head) Provisions.(Head) Provisions.


5/12

Prepaid ExpensesPrepaid ExpensesThose expenses which have been paid in advanceThose expenses which have been paid in advance

i.e whose benefit will be available in future arei.e whose benefit will be available in future arecalled prepaid expenses.called prepaid expenses.

TreatmentTreatment

P&L A/cP&L A/c -------------------------------- Dr. Side.Dr. Side.Shown, by way of deduction from the expenses.Shown, by way of deduction from the expenses.

Balance SheetBalance Sheet --------------------------Asset SideAsset Side

(Head) Current Assets(Head) Current Assets


6/12

Provision for discount onProvision for discount on

DebtorsDebtors

IIf sales are made by the merchant on the condition that iff sales are made by the merchant on the condition that ifthe amount of sales is paid within a certain period , he willthe amount of sales is paid within a certain period , he will

allow a certain percentage of discount.allow a certain percentage of discount.

TreatmentTreatment

P&L A/cP&L A/c ---------------------------------- Dr. SideDr. Side

Balance SheetBalance Sheet ------------------------Assets SideAssets Side

(Head) Current Assets(Head) Current AssetsDeduction from Sundry DebtorsDeduction from Sundry Debtors

(after deduction of further bad debts(after deduction of further bad debts

and provision for doubtful debts)and provision for doubtful debts)


7/12

Reserve for discount onReserve for discount on

CreditorsCreditorsAs the firm has to provide for discount on debtors , similarlyAs the firm has to provide for discount on debtors , similarly

, the firm may have chance to receive discount on the last, the firm may have chance to receive discount on the last

date of the accounting year, if the payment is made withindate of the accounting year, if the payment is made within

the scheduled period.the scheduled period.

TreatmentTreatment

P&L A/cP&L A/c -------------------------------------- Cr. SideCr. Side

Balance SheetBalance Sheet -------------------- liabilities Sideliabilities Side

(Head) Current Liabilities(Head) Current Liabilities

(shown by way of deduction from sundry creditors)(shown by way of deduction from sundry creditors)


8/12

Provision for DoubtfulProvision for Doubtful

DebtsDebts

It is created on the basis of anticipated losses.It is created on the basis of anticipated losses.

TreatmentTreatment

P&L A/cP&L A/c ---------------------------------- Dr. SideDr. Side(By way of addition to bad debts,(By way of addition to bad debts,

After deducting the old provisionAfter deducting the old provision

at the beginning of the year)at the beginning of the year)

Balance SheetBalance Sheet ------------------------Assets SideAssets Side

(Head) Current Assets(Head) Current Assets

(deduction from sundry Debtors,(deduction from sundry Debtors,

After deduction of further B.D)After deduction of further B.D)


9/12

Interim dividendInterim dividendThe dividend for the current year declaredThe dividend for the current year declared

somewhere in the middle of the year either out ofsomewhere in the middle of the year either out of

the profits of the previous year or out of the profitsthe profits of the previous year or out of the profits

of the current year.of the current year.

TreatmentTreatment

It is usually found in the Trial BalanceIt is usually found in the Trial Balance

P&L Approp. A/cP&L Approp. A/c -------------------------------- Dr. Side.Dr. Side.


10/12

Calls in ArrearsCalls in ArrearsIf a shareholder makes a default in sending the call moneyIf a shareholder makes a default in sending the call money

due on allotment or on any calls according to conditions ,due on allotment or on any calls according to conditions ,

the money not so sent is called calls in arrear.the money not so sent is called calls in arrear.

TreatmentTreatment

11 If it appears in the Trial BalanceIf it appears in the Trial Balance

Balance SheetBalance Sheet ---------------------------------- LiabilitiesLiabilities

(deduction from the called up capital)(deduction from the called up capital)

22.. If it appears as an adjustmentsIf it appears as an adjustments

Balance SheetBalance Sheet ---------------------------------- LiabilitiesLiabilities

(first add to the paid up capital to make it(first add to the paid up capital to make itcalled up capital then deduct again)called up capital then deduct again)


11/12

Calls in AdvanceCalls in AdvanceThose amount which a company receives inThose amount which a company receives in

advance from the shareholders, and hence it is aadvance from the shareholders, and hence it is aliability for the companyliability for the company

TreatmentTreatment

Balance SheetBalance Sheet -------------------------------- LiabilitiesLiabilities

(Head) Current Liabilities(Head) Current Liabilities


12/12

Forfeited sharesForfeited sharesIf any shareholders does not pay the amount of aIf any shareholders does not pay the amount of a

call the company may have the power to forfeit thecall the company may have the power to forfeit theshares concerned and this is called as forfeiture ofshares concerned and this is called as forfeiture of

shares.shares.

TreatmentTreatment

Appears in the credit side of Trial BalanceAppears in the credit side of Trial Balance

Balance SheetBalance Sheet -------------------------------- LiabilitiesLiabilities

Paid up capitalPaid up capital

Documents

Adjustments 5