Financial Statements (With Adjustment) Class 11 Notes Accountancy Chapter 9 - CBSE
Chapter : 9
What Are Financial Statements (With Adjustment) ?
Single Transaction
A single transaction might impact the income and cost of multiple financial years. As a result, adjustments are employed to comply with the accrual principle. It can also be utilised if one forgets to record the transaction that may have occurred during the period. Only a few costs and incomes from the present year need to be recorded in the company's books of accounts.
Closing Stock
The cost of goods that remain unsold at the end of the financial year is called the closing stock. The closing stock value is defined by comparing cost and realisable prices. The lesser among the two values is the value of the closing stock.
Outstanding Expenses
These expenses need to be paid in the current financial year but cannot be paid. As expense is generated during the financial year, it makes perfect sense to charge it against revenue earned to arrive at a true loss or profit. Hence, these are liabilities and need to be paid.
Prepaid Expenses
Those expenses in which the associated benefit has not been materialised, but the payment is already made in advance are prepaid expenses.
Income Received In Advance
The income is received in the current financial year, and the benefits will be realised in the upcoming financial year. Such income is known as income received in advance.
Accrued Income
Income earned in an accounting year but not received by the end of the financial year is called accrued income. It is due to be received in future financial years. It is shown on the balance sheet's asset side.
Depreciation
It refers to the decrease in asset value with the usage and passage over time due to wear and tear. Thus, it is generally treated as business expenses and is debited in the profit and loss accounts.
Provisions For Bad And Doubtful Debts
It occurs when there is a chance that debtors will not be able to pay the debts on time.
Provision For Discount On Debtors
An accounting phrase refers to the amount set aside to compensate for losses incurred due to debtor discounts. To obtain payment from their clients faster, business people provide a discount to consumers who pay before the debt's maturity date. A company allows discounts to debtors to motivate them to clear their debts. This is only made for those debtors who pay their money on time. The discount that a debtor will get is projected and assessed by making a provision for a discount on debtors.
Manager’s Commission
It is shown on the liabilities side of the balance sheet, and the rest are shown on the balance sheet's assets side.
