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Given below is the trial balance of a Trader as on 31st Chaitra 2071, along with necessary adjustments:

1. Outstanding salary: Rs. 10,000
2. Prepaid insurance expired: Rs. 4,500
3. Commission received in advance: Rs. 1,000
4. Interest accrued on Investment: Rs. 2,100

Outstanding: Rs. 4,000


Sagot :

Certainly! Let's address each adjustment one by one by incorporating them into the relevant accounts.

### 1. Outstanding Salary
Outstanding salary refers to the salary that has been earned by employees but has not yet been paid by the end of the period. This needs to be added to the salary expense for accurate financial reporting.

Adjustment: Outstanding Salary = Rs. 10,000.

Journal Entry:
```
Salary Expense Dr. Rs. 10,000
To Outstanding Salary Cr. Rs. 10,000
```
This increases the salary expense by Rs. 10,000 and also recognizes a liability (outstanding salary) of Rs. 10,000.

### 2. Prepaid Insurance Expired
Prepaid insurance that has expired should be recognized as an expense during the period. Previously, this amount was recorded as an asset.

Adjustment: Prepaid Insurance Expired = Rs. 4,500.

Journal Entry:
```
Insurance Expense Dr. Rs. 4,500
To Prepaid Insurance Cr. Rs. 4,500
```
This adjustment decreases the prepaid insurance (an asset) by Rs. 4,500 and increases the insurance expense by the same amount.

### 3. Commission Received in Advance
Commission received in advance is recorded as a liability because the service has not yet been provided. By the end of the period, this should still be recognized as a liability since the revenue has not yet been earned.

Adjustment: Commission Received in Advance = Rs. 1,000.

Journal Entry:
```
Commission Received in Advance Dr. Rs. 1,000
To Commission Revenue Cr. Rs. 1,000
```
This entry recognizes a commission revenue of Rs. 1,000, thereby increasing revenue and reducing the liability for commission received in advance.

### 4. Interest Accrued in Investment
This amount is the interest that has been earned but not yet received. It needs to be recognized as interest income for the period.

Adjustment: Interest Accrued in Investment = Rs. 2,100.

Journal Entry:
```
Interest Receivable Dr. Rs. 2,100
To Interest Income Cr. Rs. 2,100
```
This increases interest income by Rs. 2,100 and recognizes an asset (interest receivable) for the same amount.

### Summary
To summarize the adjustments:

1. Outstanding Salary increases salary expense by Rs. 10,000 and also creates a corresponding liability of Rs. 10,000.
2. Prepaid Insurance Expired reduces the prepaid insurance asset by Rs. 4,500 and increases the insurance expense by the same amount.
3. Commission Received in Advance increases commission revenue by Rs. 1,000 and reduces the liability for commission received in advance by Rs. 1,000.
4. Interest Accrued in Investment recognizes interest income of Rs. 2,100 and creates an asset (interest receivable) of the same amount.

Each of these entries ensures that the financial statements accurately reflect the expenses, liabilities, assets, and revenues for the period.