Question

Show the treatment of prepaid expenses, depreciation and closing stock at the time of preparation of final accounts when:

(a) When given inside the Trial Balance?

(b) When given outside the Trial Balance?

Answer 1

(i) Prepaid expenses

(a) When given inside the Trial Balance: It will be posted only in the Assets side of the Balance Sheet.

Balance Sheet
Assets		Amount
Prepaid Expenses		­­

(b) When given outside the Trial Balance:

Dr.				Cr.
Particulars		Amount	Particulars		Amount		Liabilities	Amount	Assets		Amount
Concerned Expenses									Prepaid Expenses
	Less: Prepaid Expenses

(ii) Depreciation

(a) If depreciation is given inside the Trial Balance, then it can be shown in the Debit side of the Profit and Loss A/c. It means that this depreciation amount has already been deducted from the concerned assets in the Balance Sheet.

Profit and Loss Account
Dr.			Cr.
Particulars	Amount	Particulars		Amount
Depreciation

(b) If depreciation is given outside the Trial Balance, i.e. in the adjustments, then it is shown in the debit side of the Profit and Loss Account and deducted from the concerned assets in the Assets side of Balance Sheet.

Dr.			Cr.
Particulars	Amount	Particulars		Amount		Liabilities	Amount	Assets		Amount
Depreciation on Concerned Assets								Concerned Assets
									Less: Depreciation

(iii) Closing stock

(a) The closing stock is valued at cost price or realisable value, whichever of the two is lesser. If given inside the Trial Balance, then it will be posted only in the Assets side of the Balance Sheet.

Balance Sheet
Liabilities	Amount	Assets	Amount
		Closing Stock

(b) If the closing stock is given outside the Trial Balance then, it needs to be posted at two places.

Dr.			Cr.
Particulars	Amount	Particulars		Amount		Liabilities	Amount	Assets	Amount
		Closing Stock
								Closing Stock