final accounts adjustments notes topic

  Adjustments are nothing but transactions relating to the business which have not been journalised. Therefore, to deal with adjustments one needs to understand the journal entry to be recorded if the transaction representing the adjustment is to be recorded in the books of accounts.
The adjustments relating to prereceived/receivable incomes are dealt with here. S
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                               ADJUSTMENTS NOTES  FOR CA C P T &  Inter students...

Incomes Receivable  

At the end of the accounting period, there may be incomes which have become due but have not yet been received. If the organistion is following the mercantile system of accounting, these incomes are to be brought into account.

• Credit » Income a/c

  "Income a/c" is a nominal account with a credit balance. The balance in the "Income a/c" generally indicates the total amount received on account of the income during the current accounting period. To bring the income that has not yet been brought into account into the books, the relevant income account has to be credited.
  [Income a/c – Nominal a/c – Credit all Incomes and Gains.]

• Debit » Income Receivable a/c

  The income receivable is indicative of an amount that is owed to the organisation by a person or organisation. The persons who owe to the organisation are its debtors. Thus amount of income receivable is debited to the "Income Receivable a/c".
  [Income Receivable a/c – Personal a/c – Debit the benefit receiver.]

Journal in the books of M/s ____ for the period from 1st April 2005 to 31st March 2006
Date	V/R No.	Particulars		L/F	Debit Amount (in Rs)	Credit Amount (in Rs)
1st to 30th	–	Income Receivable a/c       To Income a/c	Dr	– –	xxx	xxx
		[For the amount income relating to the current period, not yet received brought into the books.]

Adjustment

The amount of income receivable is to be

1. Added to the relevant income on the credit side of the "Trading a/" or "Profit & Loss a/c".
2. Shown as an asset on the assets side of the balance sheet.

Explanation/Illustration » Hide/Show

Income received

At the end of the accounting period, there may be incomes which have been received in advance. These are incomes which are received in advance and would have to be adjusted in the relevant income during the subsequent accounting periods. Advances received are treated in a different manner from incomes prereceived, the difference being that the advances are repayable whereas incomes prereceived are liquidated by adjusting them in the amounts to be received in the future towards the income.

• Debit » Income a/c

  "Income a/c" is a nominal account with a credit balance. The balance in the "Income a/c" generally indicates the total amount received on account of the income during the current accounting period. On the assumption that the receipts towards the income include the income prereceived, the income has to be adjusted (reduced) to ascertain the actual income that can be considered for the current period.
  "Income a/c" shows a credit balance and as such to reduce it, the "Income a/c" has to be debited.
  [Income a/c – Nominal a/c – Debit the benefit receiver.]

• Credit » Income Prereceived a/c

  The income prereceived is indicative of an amount that is owed by the organisation to another person or organisation. The persons to whom the organisation owes are its creditors. Thus amount of income prerecieved is credited to the "Income Prereceived a/c".
  [Income Prereceived a/c – Personal a/c – Credit the benefit giver.]

Journal in the books of M/s ____ for the period from 1st April 2005 to 31st March 2006
Date	V/R No.	Particulars		L/F	Debit Amount (in Rs)	Credit Amount (in Rs)
1st to 31st	–	Income a/c       To Income Prereceived a/c	Dr	– –	xxx	xxx
		[For the amount income relating to the subsequent periods received in advance being adjusted from the current period income.]

Adjustment

The amount of income prereceived is to be

1. Deducted from the relevant income on the credit side of the "Trading a/" or "Profit & Loss a/c".
2. Shown as a liability on the liabilities side of the b