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Thursday, April 22, 2010

Adjustment in Final Accounts

Those transactions given mostly outside the trial balance like expenses paid in advance, income received in advance, income accrued but not received, bad debts, provisions for bad debts, depreciation on assets etc. may be unrecorded; such transactions are called adjustments. They have to be adjusted before the preparation of final accounts for true and real determination of profit and to present the true picture of financial position of the firm.

An adjustment has two sides effect i.e., may be recorded in Trading and Profit and Loss Account or in Trading and Balance Sheet or in Profit and Loss Account and Balance Sheet or on both sides of Balance Sheet.

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