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Special adjustments and theirSpecial adjustments and their
treatment in companystreatment in companys
Final AccountsFinal Accounts
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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
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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.)
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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.
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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
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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)
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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)
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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)
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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.
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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)
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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
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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