Page 31 - VIRANSH COACHING CLASSES

Important Points :
1) Each item from Trial Balance will be included only once in the Final Accounts i.e. either in
Trading or in Profit & Loss A/c or in Balance Sheet or in working section.
2) Each adjustment has two effects for the similar amount.
3) Debit balances of Trial Balance will appear on the debit side of Trading Account or Profit &
Loss A/c or on the asset side of the Balance Sheet.
4) Credit balances of Trial Balance will appear on the credit side of Trading Account or Profit &
Loss A/c or Capital Account or on the Liabilities Side of the Balance Sheet.
5) If Salaries and Wages are given as separate items, Wages are shown on the debit side of Trading
Account while salaries are shown on the debit side of Profit and Loss A/c. If the item is “Wages
and Salaries”, it is shown on the debit side of Trading A/c and if the items is “Salaries &
Wages”, it is shown on the debit side of Profit & Loss A/c.
6) If the Trial Balance contains only “Trade Expenses”, the item will be shown on the debit side
of Profit & Loss A/c. If the Trial Balance contains “Trade Expenses” and also other items like
“Sundry Expenses” or “Office Expenses” or “General Expenses” or “Miscellaneous Expenses”,
the item “Trade Expenses” is shown on the debit side of Trading A/c while the other items of
expenses are shown on the debit side of Profit &Loss A/c.
7) The adjustment for Bad Debts and Provision for Bad and Doubtful Debts should be effected
after other adjustments for Debtors are given effect to. Such adjustments can be unrecorded
sales, drawings included in Debtors, drawings treated as sales, etc.
8) Reserve for Discount on Debtors should be given effect after the adjustments for Bad Debts and
Provision for Bad and Doubtful Debts.
9) Reserve for Discount on Creditors should be given effect after making all the other adjustments
concerning Creditors.
10) Hidden / Self-explanatory adjustments are to be given effect even if there is no special instruction
in the problem in this respect.
11) Closing Stock should be taken at “Cost or Market Price, whichever is less."
12) If a manager or a partner is allowed commission at a certain percentage on Net Profit, such
commission should be calculated in the following manner depending upon how the commission
is quoted :
a) If it is on Net Profit before charging such commission :

Rate of Commission × Net Profit
Commission Amount =
100

b) If it is on Net Profit after charging such commission :
Rate of Commission × Net Profit
Commission Amount =
100+ Rate of Commission
13) When the date of drawings are not given Interest on drawings should be calculated on average
basis or for six months
Rate 6
Drawings × ×
100 12

14) If a partner introduces capital in the middle of the accounting year, then interest on capital
should be calculated on proportionate time period only. (This complication is not expected at
your Std. XII level).

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