Professional Documents
Culture Documents
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