Page 183 - DMGT104_FINANCIAL_ACCOUNTING

Particulars Amount Amount
( ) ( )
To Opening Stock: By Sales
Unit 8: Financial Statements
Finished Goods By Closing Stock 2,40,000
To Cost of Production 40,000 Finished Goods
(Transfer from Manufacturing A/c) 2,00,000 40,000
Notes
To Gross Profit
(carried to P. & L. A/c)
40,000
2,80,000 By Gross Profit 2,80,000
To Office Rent 8,000 (brought from Trading A/c)
To Printing & Stationary 4,000 40,000
To Bad Debts 4,000
To Net Profit (carried to Capital A/c)
24,000
40,000 40,000

Balance Sheet
(as on 31st December, 2007)
Liabilities Amount Assets Amount
( ) ( )
Capital 1,72,000 Land and Buildings 1,20,000
+ Net Profit 24,000 1,96,000 Plant and Machinery 80,000
Sundry Creditors 1,20,000 Sundry Debtors 20,000
Stock on 31 st Dec., 2007:
Raw Materials 20,000
Work-in-Progress 16,000
Finished Goods 40,000
Cash in Hand 20,000
3,16,000 3,16,000

Adjustment Entries

Final accounts are prepared from the balances of Trial Balance. The final account will show the
true and proper picture of the business only when all the transactions of the business are properly
recorded. Therefore, before the preparation of final accounts the accountant must see that all the
transactions of the current year have been recorded properly in the books or not. If the accountant
find that some transactions are not incorporated in the books or wrongly incorporated in books
or partially incorporated in books, to complete the records and rectifying the errors done, some
adjustments are done. These adjustments entries are made in accounts through passing the
adjustment entries.
Usually adjustment entries are made in the books before preparing the final accounts for the
following items:
1. For Outstanding Expenses of the business
Outstanding expenses are the expenses incurred during a particular trading period, but
not yet paid by the closing date of that period. For example, unpaid salaries, unpaid rent,
unpaid wages, etc.
Relating Expenses Account Dr.
To Outstanding Expenses Account

The outstanding expenses at the time of preparation of final account are shown in the
liability side and on the other hand it is added in the relating expenses in the Debit side of
Profit & Loss Account.

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