Final Accounts with Adjustments — Flashcards

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Adjustment entries are made to find the correct profit or loss, record omitted transactions, complete incomplete accounts, rectify errors, record accrued income and expenses, and make provisions such …

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Accounts outside the trial balance are adjusted at two places because they have not been entered in the books. They need double entry treatment, so they affect both the Profit and Loss Account or Trad…

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Closing stock refers to the goods remaining unsold at the end of the accounting period. It is valued at cost price or realisable value whichever is less as per AS-2. It is shown on the credit side of …

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If closing stock is given inside the trial balance, it is shown only in the Balance Sheet on the assets side. It is not shown in the Trading Account because purchases have already been adjusted for it…

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Closing stock is valued at cost price or net realisable value, whichever is less. For example, goods purchased for ₹50,000 will be valued at ₹50,000 if net realisable value is ₹60,000, but at ₹45,000 …

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Prudence means that unrealised gain should not be taken into account, but a probable future loss should be taken into account today. This is why closing stock is valued at the lower of cost and realis…

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Outstanding expenses are expenses which have become due but have not been paid at the end of the accounting year. They are added to the related expense in the Trading or Profit and Loss Account and sh…

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If outstanding expenses are given in the trial balance, they are shown only as liabilities in the Balance Sheet. They are not added again in the Profit and Loss Account because they have already been …