Page 142 - DCOM205_ACCOUNTING_FOR_COMPANIES_II

Unit 7: Accounting for Banking Companies

notes
table 7.5: effects of Different accounts on various adjustments
transaction trading account profit/loss account Balance sheet
Closing stocks Credit Side Asset Side
Depreciation Debit side Reduction from Fixed
Asset
Expenses outstanding Addition to related exp. a/c Addition to related exp. To be shown as liability
debit side a/c debit side
Prepaid expenses Reduction from related exp. a/c Reduction from related To be shown as an asset
exp. a/c
Accrued income Addition to related income To be shown as an asset
account
Income received in Reduction from related To be shown as liability
advance income a/c
Interest on capital Intt. account to be debited Add to amount of capital

Interest on drawing Intt. account to be credited Reduction from capital

Provision for bad Debts to P& L account Reduction from amount of
debts debtors
Discount on debtors Debit to discount account Reduction from amount of
to P&L a/c debtors
Commission payable
to Manager*

* If commission is to be calculated before charging such commission = Net profit before such commission × rate/100.
If commission is to be calculated after charging such commission = Net profit before such
commission X rate/100 + rate.
Table 7.6 is showing the summary of adjustment with journal entries.
table 7.6: summary of adjustment with Journal entries

nature of transaction account to be debited account to be credited
Closing stocks Closing stocks Trading account
Outstanding expenses Concerned Expenses account Outstanding expenses a/c
Prepaid expenses Prepaid/unexpired expenses account Concerned expenses account
Accrued or outstanding income Accrued income Concerned income account
Income received in advance Concerned income account Income received in advance
Depreciation Depreciation account Asset account
Interest on capital Interest on capital a/c Capital account
Interest on drawings Capital account Interest on drawings a/c
Interest on loan Interest account Interest outstanding a/c
Bad debts Bad debt account To debtor's account
To provision for bad and
Making provision for bad debt Profit and loss account
doubtful debt account
Provision for discount on debtors Discount allowed a/c To provision on debtor's account
Provision for discount on creditors Provision for discount on creditors To profit and loss account
To trading account for stock of goods
Accidental loss, say fire Loss by Fire or other asset's account which has
been damaged
Commission payable on profits Commission on profits Profit and loss account
Drawings of goods by the promoter Drawings account Purchase account
Goods received but bill not received Purchase account Supplier's account
Claim admitted by insurance company Insurance company Trading account
but money not received
Returns inwards Returns inward Debtor's account
Returns outward Creditor concerned Returns outward account

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