61dfcmodule II
61dfcmodule II
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Profit and Loss Account Name of Institution
Importance:
• Knowledge of net profit or net loss
• Calculation of expenses ratio to sales
• Comparison of actual performance with the
desired performance
• Maintaining provision and reserves
• Determining future line of action
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Manufacturing Account Name of Institution
Characteristics:
• Balance sheet is a statement
• Prepared on a specified date
• It is a statement of assets and liabilities
• Knowledge about the nature of assets and liabilities
• Knowledge of financial position
• Assets and Liabilities tally each other
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Objectives: Name of Institution
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While preparing final accounts, at the end of every accounting period, we come across
certain problems. The accountant may come to know of certain adjustments to be
Name of Institution
made in the books of accounts to give a true picture of the state of affairs of the
business after closing the books of accounts. These adjustments generally relate to
the following:
Adjustment If appears in Trial Balance If appears in
Adjustment
I. Closing stock Cr. Side of trading a/c (i) Cr. Side of trading
A/c
(ii) Asset side of
Balance sheet
II. Depreciation Dr. side of P/L a/c (i) Dr. side of P/L a/c
(ii) Reduce the value of
concerned asset in
balance sheet
III. Appreciation Cr. Side of P/L a/c (i) Cr. Side of P/L a/c
(ii) Increase the value of
concerned asset in
balance sheet
IV. Outstanding Expenses Liability side only in Balance Sheet (i) Added to concerned
expense at the debit
side of Trading or
P/L a/c
(ii) Liability side of
Balance Sheet 7
Adjustment If appears in Trial Balance If appears in
Adjustment
V. Prepaid expenses Asset side of Balance Sheet (i) Name
Deduce from
of Institution
concerned expenses
at the debit side of
Trading or P/L a/c
(ii) Asset side of
Balance Sheet
VI. Outstanding or Accrued Asset side of Balance sheet (i) Added to the
income concerned income at
the credit side of P/L
a/c
(ii) Asset side of
Balance Sheet
VII. Unearned Income Shown at the liabilities side of (i) Deduct from the
Balance Sheet concerned income at
the credit side of P/L
a/c
(ii) Shown at liabilities
side of Balance
Sheet.
VIII. Interest on capital Debit side of the P/L a/c (i) Dr. side of P/L a/c
(ii) Increase amount of
capital at the
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liabilities side of
Adjustment If appears in Trial Balance If appears in
Adjustment
IX. Interest on drawings Credit side of P/L a/c (i) Name of Institution
Cr. Side of P/L a/c
(ii) Deduct from capital
at liabilities side of
Balance Sheet.
X. Interest on loan (BORROWED) (i) Debit side of P/L a/c
Debit side of P/L a/c (BORROWED)
(ADVANCED) (iii) Added to loan A/c at
Credit side of P/L a/c liability side of
Balance sheet.
(ADVANCED)
(v) Credit side of P/L a/c
(vi) Added to lon A/c at
asset side of Balance
Sheet.
XI. Interest or dividend on Credit side of P/L a/c (i) Credit side of P/L a/c
investment (ii) Added to the value of
investment, shown at
the asset side of
Balance Sheet
XII. Bad Debts Debit side of P/L a/c (i) Debit side of P/L a/c
(ii) Deducted from
debtors at the Asset
side of Balance 9
Sheet
Adjustment If appears in Trial Balance If appears in
Adjustment
XIII. Provision for bad debt (i) Shown at Cr. Side of P/L a/c (i) Name
Shownof Institution
at liability
or side of Balance
(iii) Deducted from total of bad sheet
debts, further bad debts at debit Or
side of P/l a/c Deducted from sundry
Or debtors at the asst
(iii) Liability side in Balance Sheet side of Balance
XIV. Provision for discount on Debit side of P/L a/c (i) sheet
Debit side of P/L a/c
debtors (ii) Debit sidefrom
(ii) Deducted of P/L a/c
debtors at the asset
side of balance sheet
XV. Provision for discount on Credit side of profit and loss A/c (i) Credit side of P/L a/c
creditors (ii) Deducted from
creditors at the
liability side of
Balance Sheet
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The following is the trial balance of Mr. Kapur on 31st March
Name of Institution
1993:
Debit Credit
353160 353160
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Name of Institution
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