Financial Statements - II Class 11 Notes CBSE Accountancy Chapter 10 (Free PDF Download)

Need for Adjustments: 

Adjustments are required because sometimes payments and receipts made in the current year may relate to previous or future years. So, these items must be adjusted so that the objectives of financial statements can be achieved i.e., they depict true and fair financial performance of the business. 

Adjustments are required in the following items: 

1. Closing Stock: It is the stock of goods at the end of the accounting year. The adjustment for the closing stock is done by 

a. By posting it to the credit side of the Trading and Profit and Loss account 

b. By posting it to the asset side of the Balance Sheet. 

The journal entry that is passed is: 

Closing Stock A/c………. Dr.

To Trading A/c

2. Outstanding Expenses: These are those unpaid expenses that the businesses haven’t paid in the present accounting period and are due. The adjustment entry passed is: 

Concerned Expense A/c……… Dr.

To Outstanding Expenses A/c 

The outstanding expenses are added to a particular expense head in the Trading and Profit and Loss account and are shown in the liabilities side of the Balance Sheet. 

3. Prepaid Expenses: These are those expenses that are paid in advance by the businesses that have not been due. The benefits of these expenses are not received in the present accounting year but in the next years. The adjustment entry that is passed is: 

Prepaid Expenses A/c……….Dr.

To Concerned expense A/c 

The prepaid expenses are subtracted from the particular expense head in the Trading and Profit and Loss A/c and are shown on the asset side of the balance sheet. 

4. Accrued Income: These are those incomes that are accrued but not yet received. The adjustment entry passed is: 

Accrued income A/c…………..Dr.

To Concerned income A/c 

The accrued income is added to the concerned income head in the Trading and Profit and Loss account and is shown in the asset side of the Balance Sheet. 

5. Income Received in Advance: This is that income which is received in advance but not yet accrued. The adjustment entry passed is: 

Concerned income A/c……Dr.

To Income received in advance A/c 

The income received in advance is deducted from the respective income head in the Trading and Profit and Loss Account and is shown in the liabilities side of the balance sheet. 

6. Depreciation: Depreciation is the decline in the book value of the fixed asset because of  regular wear and tear and passage of time. The adjustment entry that is passed is: 

Depreciation A/c ………. Dr.

To Concerned asset A/c 

It is debited to the Profit and Loss Account and in the balance sheet the asset is shown at cost minus depreciation. 

7. Bad Debts: This is that amount that can not be recovered from debtors. This is regarded as loss and the adjustment entry passed is: 

Bad debts A/c ……….Dr.

To Debtors A/c 

It is shown as an expense on the debit side of the Trading and Profit and Loss Account and in the balance sheet debtors are shown at book value less bad debts. 

8. Provision for Doubtful Debts: Sometimes we make a provision for some amount of Debtors that may not realise in future such provisions are called provisions for doubtful debts. That Adjustment entry that is passed is: 

Profit and Loss A/c ………Dr.

To Provision for doubtful debts A/c 

The provision for doubtful debts are shown as an expense In the debit side of the trading and profit and loss account and in the balance sheet the amount of debtors are shown at book value less provision for doubtful debts. 

9. Provision for Discount on Debtors: Sometimes the businesses allow some discount on the amount to be received from debtors. For this there is a provision made for discount on debtors which is an expense for the business. The provision for discount is always made on good debtors which are book value less bad debts. The adjustment entry that is passed is: 

Profit and loss A/c………. Dr.

To Provision for discount on debtors A/c 

This provision is an expense and is shown on the debit side of the trading and profit and loss account and in the balance sheet the debtors amount is reduced by the amount of provision for discount on debtors. 

10. Manager’s Commission: This is that commission which the manager gets on the net profit of the company. This percentage of commission can be in the form of either percentage before charging such commission or after charging such commission. And in case nothing is mentioned in the question it is assumed that commission is paid before charging such commission. 

In case of commission charged on profit before charging such commission.

Commission= Profit before charging such commission X Rate of commission/100 

In case of commission charged on profit after charging such commission 

Commission= Profit before charging such commission X Rate of commission/(100+ Rate of commission) 

The adjustment entry that is passed is: 

Profit and loss A/c ………Dr.

To Manager’s commission A/c

11. Interest on Capital: It is the interest that is paid on the capital of the proprietor. This interest is payable on the capital that was at the beginning of the accounting year. And in case of any additional capital brought in by the proprietor the interest is charged from the date it is brought. The adjustment entry that is passed is: 

Profit and loss A/c………. Dr.

To Manager’s commission A/c 

It is an expense and hence it is shown on the debit side of the profit and loss account and in the balance sheet it is added to the capital. 

Illustration:1 

From the following information prepare Trading and Profit and Loss Account and Balance Sheet for the year ended 31st March, 2021. 

Adjustments: 

1. Closing Stock was valued at Rs. 4,00,000. 

2. Outstanding salaries amounting to be Rs. 20,000 

3. Rent includes prepaid rent of Rs. 30,000. 

4. Bad debts amount to Rs. 50,000. 

Ans: Trading and Profit and Loss Account for the year ended 31st March, 2021 

Balance Sheet as on 31st March, 2021 

CBSE Revision Notes for Chapter 10 Accounts Class 11 – An Overview of Financial Statements – II

The reason why financial statements are deemed so necessary can be accredited to the role that they play in highlighting areas that generate the most revenue. It further helps AMN organisation to keep better track of the growth and efficiency of their business. All these reasons make it vital for students to understand the basics of this chapter right from the beginning and hence, build a strong foundation for higher studies.

This makes it all the more important for students to revise this chapter frequently. Consequently, to facilitate the process, we offer notes for Chapter 10 Class 11 Accountancy online. By including the same into your study regime, you would be able to enhance the quality of your exam revisions to a great extent. 

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Revision Notes for Ch 10 Class 11 Accountancy – In a Nutshell

The updated revision notes for Ch 10 Accounts Class 11 offers a substantial idea of what this chapter on financial statement includes. It not just provides you with a suitable explanation but also helps you identify important information about the same. Also, through your course of revision, you will come across journal entry treatment that backs up the provided explanation effectively.

Take a look at the pointers below to learn how Accounts Chapter 10 Class 11 covers Financial Statements and benefits your exam preparation accordingly. The following are the topics that are included in our notes for Chapter 10 Class 11 Accountancy in details -

• Need for Adjustment

This section highlights the importance of adjustments in exceptional cases like those earnings that have been received in advance and those that are yet to be received. Students will further learn about the ones that are not recorded at all. Additionally, with our Class 11 Accounts Chapter 10 Solutions, you will touch upon the purpose of adjustments and the items that require adjusting while preparing final accounts. 

• Closing Stock

Our revision notes for Chapter 10 Class 11 Accountancy provides a to-the-point explanation of what is represented as closing stock. Furthermore, you would also come across the step by step adjustment entry for closing stocks and the accurate side of the balance sheet it has to be placed on. 

• Outstanding Expenses

Figure out the condition that turns expenditure as an outstanding expense by referring to our study notes for Chapter 10 Class 11 Accounts. Consequently, a clear concept for outstanding expenses will help you approach both theoretical and practical problems based on it accurately. 

• Prepaid Expenses

Our current notes on Class 11 accounts Chapter 10 would offer you a better perspective on the difference between prepaid expenses and outstanding expenses. It will help you become familiar with its definition and enable you to understand which expenses can be deemed as prepaid expenses. 

• Accrued Income

Do you know what makes up as accrued income and the adjustment entry for the same? Better equip yourself with the knowledge of the same before your upcoming exams sets in, to score well in them. 

In the case you are burdened with last-minute exam revision, you may glance through our revision notes for Chapter 10 Class 11 Accounts to refresh your memory of the same conveniently.

• Income Received in Advance

Pick up the expert-approved shortcut techniques for adjusting income received in advance by merely referring to our Chapter 10 Class 11 Accountancy notes. You can easily access them at Vedantu in the form of PDF downloads.

• Depreciation

Can you define depreciation without missing out on any of the critical pointers? Refer to our notes for Account Chapter 10 Class 11, and cross-check the critical components of your answer with its help.

• Bad Debt

Find out how bad debt tends to impact the financial statement and pick up accurate techniques to adjust the same with a quick revision of our notes. Its crisp format and easy to understand language makes it easier for you to retain the information for the maximum possible time, and thus, facilitates your exam preparation. 

Additionally, you will learn about these topics in our notes – 

a. Provisions for Bad Debt and Doubtful Debts 

b. Provisions for Discounts on Debtors

c. Manager’s Commission 

d. Interest on Capital

Our notes for Chapter 10 Class 11 Accountancy provide to-the-point definitions for these topics and highlight the vital components in brief. Further, it will also offer valuable insight into their respective treatments, and necessary adjustments, accordingly. 

For example, you will also gain a reasonable insight into the topic of interest on capital and will find an accompanying illustration of a trading and profit and loss account. The step by step method and accompanying explanation provided in our notes for Chapter 10 Class 11 Accountancy will further help you to improve your learning experience significantly.  

Regardless, if you wish to strengthen your grip on this chapter in general, you can obtain our Accountancy Class 11 Chapter 10 Solutions PDFs. Doing so; you will benefit your revision process substantially and will be able to ace your upcoming exams, securing subject-best scores. 

Thus, avail our updated notes for Chapter 10 Class 11 Accountancy, and streamline your learning process in a way that will help you perform exceptionally well in your upcoming school exams.

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