Summary of Year End Adjustments for Financial Statements Adjustment Statement of Profit or Loss Statements of Financial Position Closing inventory Deduct from purchases Current asset Accrual of expenses Add to expense Current liability Prepayment of expenses Deduct from expense Current asset Accrual of income Add to income Current asset Prepayment of income Deduct from income Current liability Depreciation Depreciation charge: non-cash Non-current assets are charge/accumulated expense. reduced by accumulated depreciation of non-current depreciation giving the assets carrying amount. Irrecoverable debts Expense Deduct from trade receivables Disposal of non-current assets Debit balance: expense (loss Non-current assets reduced by on disposal). disposal. Credit balance: income (gain on disposal) Creation or increase in Expense Trade receivables figure allowance for doubtful debts. reduced by total amount of allowance. Decrease in allowance for Income Trade receivables figure doubtful debts. reduced by total amount of allowance. Goods taken by use for the Add to sales revenue Add to drawings. owner or own use.
Summary of Year End Adjustments for Financial Statements Adjustment Statement of Profit or Loss Statements of Financial Position Closing inventory Deduct from purchases Current asset Accrual of expenses Add to expense Current liability Prepayment of expenses Deduct from expense Current asset Accrual of income Add to income Current asset Prepayment of income Deduct from income Current liability Depreciation charge/accumulated depreciation of non-current assets Depreciation charge: non-cash expense. Non-current assets are reduced by accumulated depreciation giving the carrying amount. Irrecoverable debts Expense Deduct from trade receivables Disposal of non-current assets Debit balance: expense (loss on disposal). Credit balance: income (gain on disposal) Non-current assets reduced by disposal. Creation or increase in allowance for doubtful debts. Expense Trade receivables figure reduced by total amount of allowance. Decrease in allowance for doubtful debts. Income Trade receivables figure reduced by total amount of allowance. Goods taken by use for the owner or own use. Add to sales revenue Add to drawings.