Financial Accounting for Managers

Adjusted Trial Balance

By Anil Kshatriya
13 July 2015 [IMT Nagpur]
 What are Adjustment Entries

These are transactions whose effect has not been recorded in journal or
has been wrongly recorded in journal.
Hence ledger does not capture them.
Since they are recorded like a fresh transaction there are two effects of any
adjustment entry i.e. Debit effect and Credit effect.
Let us see an example:
It was found that sundry expenses worth 1,00,000 were incurred on
credit but not recorded in the books during the year.
(1) Debit Effect --- Sundry Expenses A/C
Add 1,00,000 to expenses in P&L
(2) Credit Effect--- Debtors A/C
Add 1,00,000 to Creditors in Assets of B/S
 CITY GARMENTS LTD.
UNADJUSTED TRIAL BALANCE ON AUGUST 31 2015
Furniture 20000 Depreciation Fund 2000
Merchandise Inventory 17130 Trade Payables 3900
Office supplies 3690 Share Capital 10000
Trade Receivables 4900 Retained Earnings 2320
Cash 2100 Sales 95160
Prepaid Rent 3600 Purchase Returns 90
Prepaid Insurance 600 Purchase Discounts 1440
Dividends Paid 5000
Sales Returns 430
Sales Discounts 1280
Purchases 43750
Freight & Delivery Expenses 3960
Office Salaries 1100
Sales Salaries 4300
Rent and Telephone Exp. 3070
 Adjustments to Trial Balance

Depreciation on furniture Rs.1000

Rent and Telephone expenses contains prepaid rent of Rs.300
Insurance was wrongly treated as prepaid whereas it pertains
to current year itself.
Sales salaries worth Rs. 500 are due but not paid.
Advertisement expenses worth 900 are due but neither paid
nor recorded.
Estimated income tax is Rs. 9000.
Closing stock is valued at 23,180
 CITY GARMENTS LTD.
UNADJUSTED TRIAL BALANCE , AUGUST 31 2015
Furniture 20000 Depreciation Fund 2000
Merchandise Inventory 17130 Trade Payables 3900
Office supplies 3690 Share Capital 10000
Trade Receivables 4900 Retained Earnings 2320
Cash 2100 Sales 95160
Prepaid Rent 3600 Purchase Returns 90
Prepaid Insurance 600 Purchase Discounts 1440
Dividends Paid 5000
Sales Returns 430
Sales Discounts 1280
Purchases 43750
Freight & Delivery Expenses 3960
Office Salaries 1100
Sales Salaries 4300
Rent and Telephone Exp. 3070
Total 114910 Total 114910
 ADJUSTED TRIAL BALANCE , AUGUST 31 2015
Furniture 20000 Depreciation Fund 3000
Merchandise Inventory 17130 Trade Payables 3900
Office supplies 3690 Share Capital 10000
Trade Receivables 4900 Retained Earnings 2320
Cash 2100 Sales 95160
Prepaid Rent 3900 Purchase Returns 90
Insurance 600 Purchase Discounts 1440
Dividends Paid 5000 Outstanding Sales Salaries 500
Sales Returns 430 Outstanding Advertisement 900
Sales Discounts 1280 Provision for Income Tax 9000
Purchases 43750
Freight & Delivery Expenses 3960
Office Salaries 1100
Sales Salaries 4800
Rent and Telephone Exp. 2770
Advertisement Exp 900
 From the following information prepare an
Adjusted Trial Balance as on 31st March 2015

Cash in hand 540 Sales 98,780

Cash at bank 2,630 Return outwards 500
Purchases 40,675 Capital 62,000
Return inwards 680 Sundry creditors 6,300
Wages 8,480Rent 9,000
Fuel and Power 4,730 Carriage on sales 3200
Carriage 2040Opening stock 5,760
Building 32,000 Freehold land 10,000
Machinery 20,000 Salaries 15,000
Patents 7,500 General expenses 3,000
Insurance 600 Drawings 5,245
Sundry debtors 14,500
Adjustments

(a) Stock in hand on March 31, 2015,was Rs. 6,800.

(b) Machinery is to be depreciated at the rate of 10% and
patents @ 20%.
(c) Salaries for the month of March, 2015 amounting to Rs.
1,500 were outstanding.
(d) Insurance includes a premium of Rs. 170 on a policy
expiring on September 30,
2016.
(e) Further bad debts are Rs. 725. Create a provision @ 5% on
debtors.