Hello everyone, welcome once again to another lecture,
Financial Statement with Adjustments the cherry on the cake
topic, understood the whole cake, understood the concept,
understood trading, P&L, balance sheet, understood
everything, understood the financial statement, understood
the accounting cycle, now the cake that has been prepared,
the financial statement of rupee 3 floor, which has trading
below, then P&L, then balance sheet, on top of that cherry,
cherry on the cake is financial
with adjustment, and this adjustment is cherry on the cake,
without that the cake is incomplete, that is, without
adjustment, the financial statement is incomplete, have you
ever made Yippee Maggi, yes sir, how is it made, sir , it
is made in 2 minutes, it is made in 2 minutes, it takes
time, you go to the market, how much does it cost, 14
rupees, if you want to buy Maggi, and if Yippee is of 10
rupees, you pay for the small packet, you buy it quickly,
you come home, after that one tomato,
that you will cut it, you will cut it, you will cut the
capsicum, you will cut the onion, you will cut the tomato,
if you want to cut anything else, it is up to you, then you
will mix them up, after that, what did you do, sir, you lit
the gas, then you will put the fry pan on the gas, then you
will put whatever you want to make in oil, then after that
it will get a little hot, then what will you put in it,
cumin, turmeric, a little chili,
and then when it is a little roasted, then you will put it
in it, which you have cut salads etc.
and suddenly the sound will come like this, after such a
sound comes, you will put a little water in it, equal to a
cup, and then you will tear the packet of Yippee Maggi and
break it and put it in, and then you will leave the lid
from above, and for a while you will go, a cricket match
will be coming, to watch it, a TV serial, daily soap will
be coming, sitting with aunty, to watch it, that in the
meantime, the Maggi will be ready, and some people are so
artists, they must have forgotten once
twice, keeping it on the gas, and they must have gone here
and there, if this is the case, then tell me on WhatsApp,
okay sir, now friends, everything is ready, now you put it
in a plate, and as soon as
you started eating it, you felt that there is a shortage of
something, something is missing, do you know what was left
from you, the Yippee Maggi was not perfect, what was left
from you, friends, the Maggi masala that comes in Yippee,
that masala was not sprinkled from above, this was left
incomplete, so sir, in the same way, the whole process of
accounts, journal, ledger, trial balance, trading, balance
sheet, but still there is some incompleteness, and how will
that incompleteness be
through adjustments, adjustment means that a final touch
should be given, just a final touch should be given, after
doing all the makeup, apply the black mark, the final touch
should not be seen, in the same way, in financial
statements, the last touch is of adjustments, so that the
profit does not remain incomplete, it comes out perfectly,
okay, now this is the meaning of adjustments, what is the
name of these adjustments, and how many adjustments are
there in total, let me show you, closing
2,3,4,5,6,7,8,9,10,11,12,13,14,15,16,17,18,19, to be exact,
we have 19 adjustments, if you understand this, then I
believe that you will be able to close the books of
accounts in a very good way, adjustments mean that you
close the accounts by doing the final touch, just give the
final touch up, okay, so how to learn this, friends, you
have to learn one by one, step by step, one by one, it will
not be taught in 19,19,7, all these adjustments are
different, their meanings are different, their
will be different, their concepts will be different, and
their treatments and their effect on the financial
statement are different, so we will spend a lot of time on
them, one by one in detail, now we take the first
adjustment, my dear friends, friends, we will see the
closing stock later, now we start from here, outstanding
expenses, outstanding expenses, for this you have to walk
on the pad, this is not an air fire that you will
understand the talks in the air, you will have to listen
in full detail, let's move on to the writing pad, friends,
keep writing, if you keep writing, you will become a Nawab,
if you do not write, you will become
a bridegroom, if you do not write, you will become a
husband, if you do not write, you will become a husband,
you will become a wife, if you do not write, you will
become a wife, professional course.
For example, this is CA Rohan.
CA Rohan has joined MNC, a great multinational company.
And when did he join? I will tell you the date.
1st of April 2023 1st of April 2023.
So, brother, let me tell you his salary also.
He is going to be given a salary.
In the starting itself, Rs.
1 lakh per month.
If you ask us, how much effort does it take to reach Rs.
1 lakh per month? Sir, why should I ask you? Brother, we
are practitioners.
Those who get good money in the starting of the job, they
do not understand it.
And it is not necessary that everyone comes to practice.
I am not even saying that there is any weak point on them
that they do not understand.
Those who like the job should go to the job.
But all the CAS, CS or CMA who come to practice, they know
that at the initial level, this is a very good amount,
which has to be worked hard to get.
In practice, you have to start from zero, apart from the
degree.
So, I got Rs.
1 lakh per month.
He was very happy.
And you will see his happiness from his face.
In just one second, look at this, he is very happy.
It was said that you will get Rs.
1 lakh per month.
For example, in any month, like the month of April, you
have to come all day.
Not all day, but the whole month has to come.
That is the shift of 10 to 6.
It is said that it is 10 to 6, it goes up to 8.
For CAS, it obviously goes.
For 1 April to 30 April, you will come.
Those who are on Sundays in between, those who are on
public holidays, they will get a holiday.
And you will work for us for 30 days.
Except holidays and Sundays, public holidays and Sundays.
You will work for us for 30 days.
After that, next month you will get the salary of April.
You will get the maximum salary by the 4th or 5th of the
next month.
Friends, this is what happens or not? Tell me correctly.
Yes, sir, this is what happens.
That the whole month is done and then it is said that by
the 4th or 5th of the next month, you will get its salary.
Sir, why don't they give it on the 30th? They want, the
company people.
Some people give it by the 7th, that you work with them for
5-7 days.
Next month you will get 5-7 days.
And so that you stay connected to them next month.
When you go to wait for the last salary for 7 days next
month, then you get the salary of the next month.
You will think that 7 days have come in this month.
Let's complete this too.
No one should run without a short notice.
The notice that has to be given for a month or two months.
That's why all these things are done.
And anyway, if you get work done in April month, then it
will be a check for 2 days.
It takes 1-2 days in clearance.
So brother, it will take at least 4-5 days.
The salary of April month will be paid on May 5.
Anyhow, after that means 5, 6, 7, 4, 3, whatever it is.
Similarly, the salary of May is in June. In July of June, I
make the whole year in front of you.
I make the whole year in front of you.
I had 12 passing marks. I got 11. Because I made one of the
four legs of the camel very thin.
Ma'am didn't like it at all.
She said, what happened to the camel?
That's why they gave me very low marks.
I'm telling you the truth.
But there is technology here.
I made it straight here.
Look, sir.
April.
Sir, summer is coming.
Summer came in May.
Bad condition in June.
As soon as July is over.
Hope awoke in August.
A little rest in September.
The weather was pleasant in October and November.
There was a slight chill in December.
In January, the cold is at its peak.
February is your favorite month.
You are at the peak.
And the year ended in March.
April, May, June, July, August, September, October,
November, December, January, February, March.
It's been 12 months in the year.
Friends, work will be done in the month of April.
When will the salary of the month of April be paid? 5th of
May, for example.
Then the work will be done in May.
When will CA Rohan get his salary? 5th of June.
5th of June, July.
5th of July, August.
5th of August, September.
5th of September, October.
5th of October, November.
5th of November, December.
5th of December, January.
5th of January, February.
5th of February, March.
And, and, and.
Now I will write in blue pen.
Salary of the month of March.
5th of April.
Yes.
This was our year.
1st of April, 2023 to 31st of March, 2024.
This year will end on 31st of March.
And when is the salary of the month of March being paid?
5th of April, 2024.
Where the next year has come.
The next year must have started on 1st of April, 2024.
1st of April, 2024 to 31st of March, 2025.
That is 24-25 years.
Yes, yes, yes.
So are you able to see?
The salary is of the month of March.
When will its payment be? 5th of April, 2024.
Sir, look at this.
So during the year.
April, May, June, July, August, September, October,
November, December, January, February.
Their salary was paid.
But the salary of the month of March.
The payment will be on 5th of April, 2024.
That is why when the date will come on 31st of March.
Date will come on 31st of March.
This day, this company.
The MNC company.
We are talking from this angle.
MNC company in its books.
On 31st of March.
Will have to show a liability.
Whose name is.
Salary Outstanding.
Or call it Outstanding Salary.
Up, Outstanding Express.
If it was written, then Outstanding Salary.
Outstanding Salary.
Means.
You got the work done.
From 1st of March to 31st of March.
Employees came to you to work.
You got the work done from them.
They have worked for you.
This means that you have incurred the expense.
Do you understand the meaning of incurring expense?
That you got the work done from the other person.
And you have not paid yet.
When will you pay?
You will pay on 5th of April.
But Sir.
On 31st of March.
You have to make your trading account.
P&L account and balance sheet.
This P&L account will be made.
This will be made from 1st of April to 21st of March.
So it should have a salary of 12 months.
Or not?
It should definitely come.
When P&L is being made from 1st of April to 31st of March.
It should have a salary of 12 months.
You have paid for 11 months.
That's why you have to show 1 month.
This is called outstanding salary.
This is called an adjustment.
This is an adjustment.
That you have not paid yet.
You have to show the entry of that also.
And this adjustment is the giving of accrual concept.
There are 2 concepts of accounting.
There are 2 bases.
One is cash basis.
And one is accrual basis.
Cash basis says that whatever you have received or paid in
cash.
Just record them.
Accrual concept says that whatever you have received or
paid in cash.
Just record them.
Whatever expenses you are going to pay.
You have not paid yet.
You have a liability.
Just record that also.
You have not paid yet.
But you are going to pay.
And this is the salary related to 23-24.
That's why matching concept says that 23-24 should go in
P&L.
And accrual concept says that even though it is a loan, you
have to pay after 4-5 days.
And matching concept says that it has to be in 23-24.
Because you have got a salary of 23-24.
Or from your employee.
You should not say worker.
From your employee.
From your professional.
You have to show outstanding salary.
In financial statement.
What will be the journal entry of this?
What will be the journal entry of outstanding salary?
If you have paid the expenses.
For example, if you have paid the salary, then you will do
the entry of the expense, that is, the salary account debit
is absolutely correct, sir.
And pay from wherever you do it to the bank or cash account.
If you have paid from the bank, then the bank account, if
you have paid from the cash, then the cash account.
How did you debit this? According to the rule of debit all
expenses, all expenses are debited, so the salary is
debited.
And if you have done the payment from the bank or cash,
then you have created it.
Now, if the payment has not been done in the month of
March, this entry is the salary account debit to the bank
or cash account.
This entry will run for 11 months.
But the last month is the month of March, friends, what
will happen in the month of March, what will happen in the
month of March?
There will be no payment here, so it will not come to the
bank or cash.
A liability, a loan is on your head, which you have to pay
after 4-5 days.
You will credit that loan, whose name is To Outstanding
Salary Account.
To Outstanding Salary Account.
We credit liability, so we will credit Outstanding Salary
Account.
Salary Account Debit To Outstanding Salary Account.
This will be the entry of March.
So, whichever accountants are watching our clip, or whoever
is working in CA offices, CSCMA offices,
Children are watching our video, I would like to tell all
of them,
Whichever client you are accounting for, you will put the
entry of the salary of the month of March of that client.
Salary Account Debit To Outstanding Salary Account.
And when you start in the next year, then on April 5, April
6, April 7, you will pay the outstanding salary of the
month of March.
Outstanding Salary Account Debit To Cash.
Or Bank.
Whatever it is.
Okay Sir. Okay. Okay.
We will only talk about Salary To Outstanding Salary now.
Because we are reading the adjustments.
When it will be paid, then on April 5.
That is simple.
Liability will end, Debit will be done, Outstanding Salary
Account Debit To Bank or Cash will come.
From where you have made the payment.
Now, what will be the effect of this on your financial
statements?
This will be the thing to see.
Brother, salary is an expense.
I will write with another color pen.
Salary is an expense.
And where will the expense go?
In P&L account.
Because this is not a direct expense related to goods.
Sir.
Maybe we have given the salary to them.
To whom brother?
Those who have made goods.
Hey brother, they are called workers.
The salary given to them is called wages, not salary.
Business is from two places, friends.
One factory and one office.
The factory where the goods are made, the office where it
is sold.
Labor class works in the factory.
Employee professional class works in the office.
The salary given to the workers working in the factory is
called wages.
It goes to the trading account.
That is related to goods.
And the salary given to the employees and professionals in
the office is called salary.
So this is the expense of the office, not the expense of
goods production.
That's why it will go to the P&L account.
And outstanding salary, sir, is a liability on you.
You have not paid on March 31st.
So the balance sheet of March 31st, 2024.
In that you will show the liability side.
In the name of outstanding salary.
I will show you clearly.
One will affect P&L.
And this adjustment will affect the balance sheet.
In the balance sheet, you will show the liability side.
Outstanding salary.
And in P&L, you will show the expense side.
Outstanding salary.
You will show the salary of 11 months in that.
The salary of the 12th month is also in P&L.
Okay? Okay, sir.
So friends.
Similarly, you can have any other outstanding expense.
Like outstanding rent.
You have given for 11 months.
You will give after 12 months.
Then it will be entered.
Rent account debit to outstanding rent.
Once in P&L, the debit side.
And in the balance sheet, the liability side.
Its effect will be this.
Similarly, any other expenses can happen.
Sir, why is its name outstanding?
Out means outside.
Standing means standing.
People who take money.
Employees are standing outside to take salary.
Landlord is standing outside to take rent.
Standing outside means there is only 3-4 days time.
That's all you have to pay.
Just think they are standing outside.
They are going to come anytime.
That's why its name is outstanding expenses.
Okay.
We will meet you in the next clip.
In the next video.
Thank you, bye bye and take care.