Adjustments Acc

8/13/2019 Adjustments Acc

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CLASSIFICATION OF ASSETS

Assets: Property of any description belonging to a person or business can be taken as asset

For e!a"ple# Cas$# Stock# Furniture# Plant and %ac$inery# &uilding# etc

Assets are classified as

1. Fixed Assets

2. Floating Assets

3. Wasting Assets

4. Fictitious Assets

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1. Fixed Assets

Fi!ed assets are assets of per"anent nature '$ic$ are not intended for re(sale T$ey are used

to carry on business Trader earns profit 'it$ t$e $elp of fi!ed assets Fi!ed assets are alsocalled as capital assets or long li)ed assets

For e!a"ple# Land# &uildings# %ac$inery# Furniture# etc

Since t$ese assets are not intended for resale t$eir "arket )alues need not be s$o'n in t$e

books T$ey are )alued on t$e price at '$ic$ t$ey $a)e ac*uired less depreciation

2. Floating Assets

Floating Assets are also kno'n as circulating assets

Floating assets are t$ose assets t$at are intended to be sold or con)erted into cas$ on a later

date or and '$ic$ fre*uently undergo c$ange

For e!a"ple# Cas$# Stock# Sundry +ebtors# &ills ,ecei)able# etc

Floating Assets are again sub(di)ided into t'o categories


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i. Liquid Assets

ii. Non-liquid Assets

i. Liquid Assets

Li*uid Assets are t$ose assets '$ic$ can be con)erted into cas$ 'it$out appreciable

loss

For e!a"ple# Cas$ in $and# Cas$ at bank#

ii. Non-liquid Assets

Non(li*uid Assets are t$ose assets '$ic$ cannot be readily con)erted into cas$ or not

'it$out any appreciable loss

For e!a"ple# Stock# +ebtors# &ills ,ecei)able# etc

Floating assets are )alued on t$e principle of cost price or "arket price '$ic$e)er is less

3. Wasting Assets

-asting Assets are t$ose '$ic$ are depleted gradually or e!$austed in t$e process of

'orking# suc$ as "ine or a *uarry Since t$e depreciation arise due to its e!$austion# it is

difficult to kno' $o' "uc$ of it is 'asted .ence t$ey are )alued at t$eir original cost

"aking pro)ision for t$eir depreciation

4. Fictitious Assets


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Ad/ust"entsOutstanding: e!ceptional# terrific# 'onderful# stupendous# da00ling# "ar)elous# e!cellent# great# superior#

abys"al 1Antony"2# unresol)ed# unsettled# re"aining# o'ing# due

Ascertained: continued# constant# continual# continuous# nonstop#

Ot$er'ise: or else# if not

Sustained: continued# constant# continuous# nonstop#

T$e "ain ob/ect of preparing profit and loss account is to find out t$e Net Profit or Net Loss during a

particular accounting period In order to ac$ie)e t$is ob/ecti)e it beco"es necessary t$at all e!penses

incurred during a particular accounting period '$et$er actually paid or not# t$e '$ole of t$e losses

sustained '$et$er ascertained or esti"ated Si"ilarly Inco"es actually recei)ed or yet to be recei)eds$ould be broug$t into account In ot$er 'ords all outstanding and prepaid ite"s of inco"e and

e!penditure and certain notional ite"s like depreciation# interest on capital# reser)e for bad debts#

pro)isions# etc# of t$e accounting year s$ould be broug$t into account T$ese are ot$er'ise kno'n as

ad/ust"ents

3ery fre*uently certain e!penses relating trading period "ay be due and not paid Like 'ise certain

e!penses "ay $a)e been paid in ad)ance Si"ilarly t$ere "ay be inco"e earned but not recei)ed

So"eti"es inco"e "ay $a)e been recei)ed in ad)ance but it is not actually earned during trading periodCertain debts "ay beco"e irreco)erable fro" debtors

T$e co""on ite"s t$at re*uire ad/ust"ents before or at t$e ti"e of t$e preparation of final accounts

4 Outstanding E!penses

5 Prepaid E!penses

6 Inco"e Earned &ut Not ,ecei)ed

7 Inco"e ,ecei)ed in Ad)ance8 +epreciation on Assets

9 Appreciation on Assets Interest on Capital

; Interest on +ra'ings


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48 Co""ission of %anager# etc# as Percentage of Profit

49 Losses &y Accidents

4 >oods +istributed as Free Sa"ples

4; >oods -it$dra'n for Personal ?se

4oods ,ecei)ed but not ,ecorded in t$e &ooks5= Sale of Assets ,ecorded As Sale of >oods

54 >oods ?sed for %anufacturing Assets55 >oods Sold and +eli)ered &ut Not ,ecorded in &ooks

56 >oods Sold on Sale or ,eturn &asis -rongly Treated as Sales

57 +is$onor of &ills ,ecei)able

Documents

Adjustments Acc