YEAREND ACCOUNTING PROCEDURES Other Adjustments Grade 10 Accounting

YEAR–END ACCOUNTING PROCEDURES Other Adjustments Grade 10 Accounting Module 10 Lesson 7

OTHER ADJUSTMENTS �Some adjustments that occur throughout the year and are not year-end adjustments have been covered in previous modules. �It may, however, be necessary to record them at yearend to ensure accuracy

1. Bad Debts �Adjustment Further bad debts must be written off �Entry in the General Journal Debit Bad Debts; Credit Debtors Control �Effect in the Post-Adjustment Trial Balance Bad Debts (expense) increases; Debtors Control decreases �Effect on Accounting equation Assets decrease; Expense increase (Owners’ Equity decreases)

2. Bad Debts Recovered �Adjustment Received a cheque from a debtor. His account had previously been written off �Entry in the General Journal Debit Bank; Credit Bad Debts recovered �Effect in the Post-Adjustment Trial Balance Bank increases; Bad Debts Recovered (income) increases �Effect on Accounting equation Assets increase; Income increase (Owners’ Equity increases)

3. Insolvencies �Adjustment A debtor who owed R 500 was declared insolvent. His state paid a dividend of 20 cents in the Rand. The balance of his account must be written off. No entries had been made. �Entry in the General Journal Debit Bank R 100; Credit Debtors Control R 100 Debit Bad Debts R 400; Credit Debtors Control R 400 �Effect in the Post-Adjustment Trial Balance Bank increases R 100; Debtors Control decreases R 100 Bad Debts increases R 100; Debtors Control decreases R 400 �Effect on Accounting equation Assets increase R 100; Assets decrease R 100 Assets decrease R 400; Expenses increase (Owners’ Equity decreases) R 400

4. Interest on overdue Debtors �Adjustment A debtor owes R 1 200. His account is overdue. Charged him R 40 interest. �Entry in the General Journal Debit Debtors Control R 40; Credit Interest on Overdue account R 40 �Effect in the Post-Adjustment Trial Balance Debtors Control increases R 40; Interest on overdue account (income) increases R 40 �Effect on Accounting equation Assets increase R 40; Income increase (Owners’ Equity increases) R 40

5. Interest on overdue Creditors �Adjustment A creditor charges us R 140 interest on our overdue account. �Entry in the General Journal Debit Interest expense R 140; Creditors Control R 140 �Effect in the Post-Adjustment Trial Balance Interest expense increases R 140; Creditors Control increases R 140 �Effect on Accounting equation Expenses increase (Owners’ Equity decreases) R 140; Liabilities increase R 140

6. Stock losses �Adjustment Stock costing R 1 000 was lost due to theft. A claim was lodged with the insurance company who agrees to pay R 750. This amount has not yet been received. �Entry in the General Journal Debit Loss due to theft R 1 000; Credit Trading Stock R 1 000 Debit Accrued Income R 750; Credit Loss due to theft R 750 �Effect in the Post-Adjustment Trial Balance Loss due to theft (expense) increases R 1 000; Trading Stock decreases R 1 000 Accrued income increases R 750; Loss due to theft (expense) decreases R 750 �Effect on Accounting equation Expenses increase (Owners’ Equity decreases) R 1 000; Assets decrease R 1 000 Assets increase R 750; Expenses decrease (Owners’ Equity increases) R 750

7. Bank Charges/Interest on Overdraft �Entry Debit Bank Charges/Interest on overdraft; Credit Bank �Effect in the Post-Adjustment Trial Balance Bank charges/Interest on overdraft (expense) increases; Bank decreases �Effect on Accounting equation Expenses increase (Owners’ Equity decreases); Assets decrease

8. Stop Orders/Debit Orders �Entry Debit the respective account, e. g. Insurance; Credit Bank �Effect in the Post-Adjustment Trial Balance Insurance (expense) increases; Bank decreases �Effect on Accounting equation Expenses increase (Owners’ Equity decreases); Assets decrease

9. Dishonoured Cheques �Adjustment The bank returned a debtors cheque for R 365 due to insufficient funds. A discount of R 35 had previously been allowed on this cheque. � Entry in the General Journal Debit Debtors Control R 365; Credit Bank R 365 Debit Debtors Control R 35; Credit Discount Allowed R 35 �Effect in the Post-Adjustment Trial Balance Debtors Control increases R 365; Bank decreases R 365 Debtors Control increases R 35; Discount allowed (expense) decreases R 35 �Effect on Accounting equation Assets increase R 365; Assets decrease R 365 Assets increase R 35; Expenses decrease (Owners’ Equity increases) R 35

10. Correction of errors The usual procedure is followed in respect of correction of errors and the necessary adjustments are made to the post-adjustment figures.

11. Drawings Debit Drawings Credit relevant account Trading Stock taken for drawings always recorded at cost price