Adjustments in Final Accounts with Example - Different Types of Adjusting Entries
Here we discuss about the adjustments in Final Accounts with example. It is very important topic of Accounting . Adjustments are made at the end of accounting period. For finding Financial Performance (Net Profit) of the Business , there are two systems of ascertaining Net Income of the business. 1. Cash System of Accounting 2. Accrual System of Accounting 1) Cash System of Accounting Under this system, transactions are recorded only when cash is received or paid. This system ignores the important accounting concept called Matching Concept . For Example, In 2014, we sold goods for Rs.50000 and received Cash for Rs.30000. In this case Rs.20000 is not recorded in the year 2014. It is recorded only when Cash is received for such amount. 2) Accrual System of Accounting Accrual system emphases on Matching Concept of Accounting. We record transaction with the full amount whether the Cash received in part or full. For Examp...