Adjustment of Final Account of Sole Trader

Account adjustments, also known as adjusting entries, are entries that are made in the general journal at the end of an accounting period to bring account balances up-to-date. Unlike entries made to the general journal that are a result of business transactions, account adjustments are a result of internal events.

 Adjustment is the process of adjusting outstanding and prepaid expenses and incomes, depreciation of assets, bad debt, interest on capital and drawings etc., into the final accounts. The aim of adjustments is to include in or exclude all the expenses and incomes related to the trading period in the final accounts.

 All adjustments are unrecorded items and they do not appear in the trial balance. So before final accounts are prepared these items should be adjusted and recorded, each in two different accounts. The main purpose of adjusting entries is to update the accounts to conform with the accrual concept. ... If adjusting entries are not prepared, some income, expense, asset, and liability accounts may not reflect their true values when reported in the financial statements. For this reason, adjusting entries are necessary.

Adjustment of Final Account of Sole Trader:- Download the File for all Adjustments with their Entries.

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Post by:- Akshay Shivankar