Page 76 - DMGT403_ACCOUNTING_FOR_MANAGERS

Unit 4: Final Accounts

Dr Cash A/c Cr Notes

Date Particulars Date Particulars
March 31 To Interest 6,500 By Balance c/d 6,500
6,500 6,500
To balance b/d 6,500

Dr Interest in Advance A/c Cr

Date Particulars Date Particulars
To Balance c/d 1,500 March 31 By Interest 1,500
1,500 1,500
By balance c/d 1,500

How does the interest received in advance affect the Profit & Loss A/c and Balance sheet?
Dr Profit & Loss account for the year ended………….. Cr
By Interest 6,500
Less Interest received in 1,500
advance from Kandhan
Total amount of Interest 5,000

Balance sheet as on dated…………………..
Liabilities Assets
Interest received in advance 1,500

1,500

5. For the Depreciation on Assets
Depreciation: The value of fixed assets diminishes gradually with their use for business
purposes. The following general entries will be passed:

Depreciation Account Dr.
To Relating Assets Account
Depreciation is subtracted from the relating assets in the assets side of the Balance Sheet
and disclosed in the debit side of Trading and Profit & Loss Account.
6. Interest on Capital and Drawings
Interest on capital: The proprietor wants to calculate his profit after considering the
interest which he loses by investing his money in the firm.
Interest on Drawings: As business allows interest on capital it also charges interest on
drawings made by the proprietor. Interest so charged is an income for the business on one
hand and expense for the proprietor on the other hand.

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