Page 163 - DCOM101_FINANCIAL_ACCOUNTING_I

Unit 12: Final Accounts

14. Goods distributed as free samples/charity: It may be debited in the goods sent as free Notes
samples or Advertisement account and credited to Purchases Account. The following
journal entry will be passed:
Goods sent as free sample A/c Dr

To Purchases A/c
15. Provision for Income Tax/advance tax: Provision for Income-tax is made based on
estimation and accordingly Advance Tax would have been paid. `Provision for Income-
Tax` would appear in Current liabilities and `Advance Tax` will appear under Advances in
Current Assets. Both the accounts can be adjusted once the tax is assessed and the return is

filed. If the provision made in the books is lesser, additional tax liability will be booked as
expenditure and if the Advance Tax paid is more than the provision, the excess paid will

continue to be shown under current Assets till the receipt of refund. So once the final tax is
ascertained, both the accounts will be given effect and adjusted.
12.6 Final Accounts with Adjustments

The given below are the examples explaining the preparation of final accounts with
adjustments:

st
Illustration 6: Prepare final accounts from the following balances of Mr. Ankit as on 31
December, 2007.
Extracts of Balances
st
as on 31 December, 2007
Debit Balances ` Credit Balances `
Drawings 45,000 Capital Account 6,09,000
Goodwill 90,000 Bills Payable 41,400
Land and Building 1,80,000 Sundry Creditors 91,500
Plant and Machinery 1,20,000 Purchase Returns 7,950
Loose tools 9,000 Sales 3,45,000
Bills Receivable 6,000
Stock 1.1.2007 1,20,000
Purchase 1,53,000
Wages 60,000
Carriage Inwards 3,600
Carriage Outwards 4,500
Coal and Gas 16,800
Salaries 12,000
Rent, Rates and Taxes 8,400
Discount allowed 4,500
Cash at Bank 75,000
Cash in Hand 4,200
Sundry Debtors 1,35,000
Repairs 5,400
Printing and Stationery 1,500

Bad Debts 3,600
Advertisements 10,500
Sales Returns 6,000
Furniture and Fittings 3,600
General Expenses 15,750

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