Dr.      Trading and Profit & Loss Account for the year ending on 31st March, 2016                  Cr.

                                    Balance Sheet as at March 31, 2016

It is a normal practice in the business to allow cash discount to those debtors from whom the payment is received promptly or within a fixed period. Discount thus, allowed will be an expenses of the business and is therefore, debited to the Profit & Loss Account. Since there will be certain debtors who will make early payment in the next accounting year and will be allowed such discount, a provision for such discount is created in the current year itself. The process of creating a provision for discount is the same as for the provision for doubtful debts. The following entry will be passed for this purpose:
Profit & Loss A/c Dr.
To Provision for Discount on Debtors A/c
Treatment in Final Accounts : Such provision is shown on the debit side of the Profit & Loss account and is also deducted from Sundry Debtors on the Assets. side of the Balance Sheet.
If should be noted that, discount willbe allowed only to those debtors who will make prompt payment. As such, the provision for discount is calculated on good debtors left after deducting further bad debts given in adjustments and the provision for doubtful debts required to be made at the end of year.

Goods may be sold to the customers on sale or return basis. In this case, if goods are approved by him, he will keep them, otherwise he will return the same within a time period. Such goods are normally recorded as actual sale of goods. When such goods are returned by the customer, the sale is cancelled.
Goods sold on approval basis, but not confirmed are adjusted in final account as follows:
(i) Sales amount is deducted from sales in Trading A/c and from debtors in the Balance Sheet.
(ii) Cost of such goods is added to closing stock shown on the credit side of the Trading A/c and the assets side of Balance Sheet.

A manager may be entitled to a commission on profits. It is usually given as a fixed percentage on the net profits earned by the firm. In this case, first of all, net profit before commission is calculated. Then, commission payable is calculated as follows:
(i) When commission is payable on net profit before charging such commission:
Commission = Net Profits Before Commission\(\times\)Rate/ 100
(ii) When commission is payable on net profit after charging such commission:
Commission = Net Profits Before Commission \(\times\) \(\frac { Rate }{ 100+Rate } \)

Expenses due but not paid are called unpaid or outstanding expenses. Expenses have become due means the benefit has been derived and therefore, all such expenses must be brought into books of accounts. Following adjustment entry should be passed for adjustment of outstanding expenses: Expenses A/c                           Dr.
To Outstanding Expenses A/c
(Being outstanding expenses recorded) 

Closing stock is shown in final accounts as follows:
(i) On the credit side of the Trading A/c
(ii) On the assets side of Balance Sheet

Several accounting principles are relevant for preparation of final accounts. On the basis of accounting period assumption, the final accounts are prepared every year. When we prepare Trading and Profit & Loss A/c, the matching principle is to be kept in mind. According to this principle, the incomes of a given period should be matched with expenses of the same period. The matching of revenue with expenses is based on accrual system of accounting. Due to this reason, several adjustments are made in final accounts. For example, a firm closes its accounts on 31^st March and salaries for the month of March have not yet been paid. Adjustment should be made for outstanding salaries to calculate true and fair profits. For this purpose, journal entries are passed, which are called adjustment entries.