Page 69 - DMGT403_ACCOUNTING_FOR_MANAGERS

Accounting for Managers

Notes Balance Sheet prepared in Permanency Order

Balance Sheet prepared under this order is the reverse of the Balance Sheet prepared in liquidity
order. In this case first those assets are shown which are more permanent means fixed assets and
then less permanent assets (Current Assets) are shown. Similarly, first long-term liabilities
(more permanent) are shown then less permanent (short-term on current) liabilities are shown.
The proforma of such type of Balance Sheet is given below:
Proforma of Balance Sheet in Permanency Order
(as on ........................)
Liabilities Assets
Long-term Liabilities Fixed Assets
Capital ------ Land & Building -----

(+) Net Profit ------ Plant & Machinery -----
------ Furniture -----
(–) Drawings ------ ------ Long-term Investment -----
Long-term Loans ------ Goodwill -----
Current Liabilities Patents & Trademarks -----
Sundry Creditors ------ Livestock etc. -----
Bank Overdraft ------ Current Assets
Bill Payable ------ Closing Stock -----
Short-term Loan ------ Debtors -----
Outstanding Expenses ------ Accrued Incomes -----
Un-accrued Incomes ------ Prepaid Expenses -----
Bill Receivable -----
Short-term Investments -----
Cash in Bank -----
Cash in Hand -----
------ -----

Adjustment Entries
If the accountant finds that some transactions are not incorporated (making proper accounting)
in the books or wrongly incorporated in books, to complete the records and rectifying the errors
done, some adjustments are made. They are called 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: All those expenses which are not paid in the related accounting
period are termed as outstanding expenses.

Example: If a company has to pay 4000 as rent for the accounting period
31.03.2009 - 31.03.2010 but the company had paid 3000 only then the balance 1000 will
be treated as outstanding expense. The following general entries will be passed:
Relating Expenses Account Dr.

To Outstanding Expenses Account

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