University of Mumbai - FYBMS - Introduction to Financial Accounts

1. To know financial performance and
financial position
- Ms. Fleur Dsouza, Asst. Prof., SIES CE

2.  Periodical matching of expenses with income
 Adjustment made in Journal Proper
 Postings made in Ledger which changes its
balancing figures
 One adjustment in
Manufacturing/Trading/Profit & Loss
Account and other in Balance Sheet

3.  It is unsold stock lying with us
 Value at cost or market price, whichever is
lower
 1st entry – Credit side of Trading Account
 2nd entry – Asset side of Balance sheet

4.  Expense of current year not yet paid
 1st entry – Add to expense head in Debit side of
Mnfg/Trading/P&L Ac
 2nd entry - Liability side of BS

5.  Expense of next year paid in advance
 1st entry – Deduct from expense head in Debit
side of Mnfg/Trading/P&L Ac
 2nd entry - Assets side of BS

6.  Income relating to next year but received in
this year
 1st entry – Deduct from income head in Credit
side of Mnfg/Trading/P&L Ac
 2nd entry - Liabilities side of BS

7.  Income relating to current year but not
received
 1st entry – Add to income head in Credit side of
Mnfg/Trading/P&L Ac
 2nd entry - Assets side of BS

8.  Sundry Debtors which are not recoverable
 1st entry – Show entry on Debit side of P&L Ac
 2nd entry - Deduct from Sundry Debtors on
Assets side of BS

9.  Sundry Debtors which may not be recoverable
 It is not actual expense, only a reserve being created out of
profits
 1st entry – Add to Bad Debts on Debit side of P&L Ac
 Bad Debts
Add : New RDD
Less : Old RDD
= Final Figure in P&L Ac
 2nd entry - Deduct from Sundry Debtors on Assets side of BS
 It is calculated as a percentage of Recoverable Debts
 Sundry Debtors
Less : Bad Debts
= Recoverable Debts
Less : RDD
= Realisable Debts

10.  Cash discount likely to be given in future
 It is not actual expense, only a reserve being created out of
profits
 1st entry – Add to Discount allowed on Debit side of P&L Ac
 2nd entry - Deduct from Sundry Debtors on Assets side of
BS
 It is calculated as a percentage of Recoverable Debts
 Sundry Debtors
Less : Bad Debts
= Recoverable Debts
Less : RDD
= Realisable Debts
Less : PDD
= Net Realisable Debts

11.  Full Loss borne by Firm -
1st Entry - Show on Debit side of Profit & Loss Ac
2nd Entry – Goods lost by Fire show on Credit side of Trading A/c.
 Full claim paid by Insurance company -
1st Entry – Add claim amount to Cash/Bank Balance in Assets side
of BS
2nd Entry – Goods lost by Fire show on Credit side of Trading A/c.
 Claim admitted but not paid by insurance company –
1st Entry – Show claim amount as Insurance Claim Receivable in
Assets side of BS
2nd Entry – Goods lost by Fire show on Credit side of Trading A/c

12.  1st Entry – Show entry as Advertisement on
Debit side of P&L Ac
 2nd Entry – Entry as GOODS DISTRIBUTED AS
FREE SAMPLES on Credit Side of Trading Ac.

13.  1st Entry – Deduct amount from Capital on
Liabilities side of BS
 2nd Entry – Entry as Goods withdrawn by
Proprietor on Credit Side of Trading Ac.

14.  1ST ENTRY - Add to Purchases in Debit side of
P&L
 2nd Entry – Add to Creditors in Liabilities side
of BS

15.  1ST ENTRY - Add to Sales in Credit side of
P&L
 2nd Entry – Add to Debtors in Assets side of BS

16. Refer to format of Manufacturing A/c, Trading
A/c, P&L A/c and Balance Sheet from text book

17. THANK YOU