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.

Generally, some of the businessman's money remains unpaid by his customers It is that all the customers are not dishonest, but nobody knows of the future. A customer may become bankrupt, may become dishonest or may even die. His estates may not be able to pay the businessman's debt. The amount not recovered is called Bad Debt. It is shown on the debit side of the Profit and Loss A/c. At the end of the year before closing the books of accounts the trader maintains a Reserve for Bad Debts on his Debtor Below the Trial Balance it is given that % Reserve be maintained on Debto This amount of Reserve is added in the amount of Bad Debts and shown on the debit side of the P & L A/c and deducted from the amount of Sundry Debtor Bad Debt is written in the Trial Balance and shown only once i.e.,in the P & L A/c but the Reserve is given in the adjustments, it is shown at two places, in the P & L A/c and in the Balance Sheet.
It is not necessary that the whole of the Reserve is utilised in writing off the Bad Debts. The amount thus, unutilised from the Reserve for Bad Debts is carried forward to the next year. It shows a credit balance. So, it is shown as Old Reserve on the credit side of the P & L A/c.

(i) Outstanding Expenses: This term refers to those expenses which have become due in the accounting period for which the final accounts have been prepared but have not yet been paid. As they are the expenses of the current year, so they must be debited and charged from the profit and loss account of the current year. The expenses remained paid so far during the current year, so they are the liability of the firm
(ii) Prepaid Expenses: There are, several expenses that are usually paid in advance, e.g., fire insurance, telephone charges etc., and at the time at balancing it is found that the whole of the period covered by the amount already .spent has not yet expired. The proposition of the amount paid which relates to the next period is, therefore, to be carried forward to the next year. These expenses are deducted in the Profit and Loss Nc and shown as Assets in the Balance Sheet. For example, a trader spent 4,000 on advertisement for two yea 2,000 will be prepaid expenses. Following Journal entry will be passed.

Prepaid Advertisement A/c	Dr.	2,000
To Advertisement A/c			2,000

(iii) Income Received in Advance : Sometimes the businessman receives some amount in advance which is more than what he should have received in the current year for a particular item. Such an amount is a liability for him. For example, Rajender Gupta, has to receive 1,200 as Rent during the year from his tenant, but the tenant paid 1,500, 300 has been in advance which is concerned with the next year. Thus, in the P & L A/c it will be shown as Rent received in advance on credit side and in the Balance Sheet it will be shown as Liability. Its adjustments will be as follows :

Rent A/c	Dr.	300
To Rent received in Advance (Being rent received in Advance brought into books)			300

Particulars		Amount(Rs.)	Particulars	Amount(Rs.)
By Rent A/c	1,500		Rent Received in Advance	300
Less: Rent Received in Advance	300
		1,200

(iv) Accrued Income: Sometimes it so happens that a trader earns an income but does not receive it up to the time of preparation of Final Accounts. Such an income is called income earned but not received or Accrued Income. For example, the trader receives an annual rent of 3,000 on his building but up to the time of preparation of Final Accounts he has received only 2,500.He is still entitled to receive 500 more. An adjustment is necessary for this amount before the Final Accounts are prepared otherwise the net profit will be reduced by 500. This amount is shown on the credit side of P & L A/c and on the Assets side of the Balance Sheet. Its Journal entry will be as follows:

Accrued A/c	Dr.	500
To Rent A/c (For accrued Rent brought in the books)			500

Dr. Profit & Loss Account	Cr.
By Rent A/c    2,500
Add: Accrued     500
Rent A/c
	3,000

Balance Sheet	Assets Side
Accrued Rent	500

Value of unsold goods at the end of an accounting period is termed as closing stock. It is valued at cost price or the realisable value, whichever is less. Treatment of closing stock:
(i) When closing stock is given in trial balance: It is shown on Assets side of Balance sheet only.
(ii) When closing stock is given in the adjustment: It is shown at two places-
(a) Asset side of balance sheet
(b) Credit side of Trading Account.

In order to ascertain the true profit or loss of the business for a particular year, it is necessary that all expenses and incomes (received or accrued orders) relating to that year are taken in to consideration.

Accounting treatment of Deferred Revenue Expenditure: These expenditures are capitalised, so they are treated as assets in the Balance Sheet like other assets. As these assets are not tangible, therefore, they will have to be written- off over a certain period. Whenever a part of such expenditure will be charged out of Profit and Loss A/c, we shall debit Profit & Loss A/c and credit specific assets account. The amount written off will also be deducted from the book value of assets.

Sometimes a part of goods purchased by the firm for its usual business may be used for making an asset. In this case, goods so consumed are a capital expenditure and therefore, are debited to Asset Nc for which it they used and credited to purchases account. For example: a firm dealing in iron and steel items, used some steel and iron angles for making a shed. It should be treated in final accounts as follows:
(i) It will be deducted from the purchases in the Trading A/c
(ii) Added to respective asset in the Balance Sheet.

Sometimes goods are distributed as free samples for the purpose of trial and advertisement. It should be treated in final accounts as follows:
(i) On the one hand, it is deducted from purchases in the Trading A/c
(ii) On the other hand, it is shown on the debit side of Profit & Loss A/c as advertisement.

Loss of goods due to fire, theft or accident is known as abnormal loss of goods. If such goods were insured by the firm, then an insurance claim may be received in full or part from the insurance company. Effect of this adjustment on final accounts will be as follows:
(i) Cost of goods lost/destroyed is either deducted from purchases or shown on the credit side of Trading A/c
(ii) Net loss, i.e., gross loss less insurance claim accepted, if any, shall be shown on the debit side of Profit & Loss A/c
(iii) Insurance claim accepted will be shown on the assets side of Balance Sheet

Interest on capital is treated in the final accounts as follows:
(i) It is shown on the debit side of Profit &Loss Nc as it is a loss to the firm
(ii) It is added to capital on liabilities side of Balance Sheet.

Provision for discount on creditors is treated in final accounts as follows:
(i) It is shown on the credit side of the Profit & Loss A/c
(ii) It is deducted from the creditors on the liabilities side of Balance Sheet. It is to be noted that the creation of provision for discount on creditors is against the prudence concept. This concept suggests to take into account expected losses only and not the expected gains, while provision for discount on creditors is an expected gain.

Provision is made for a known liability, the amount of which cannot be determined with substantial accuracy. Provision for bad debts is treated in final accounts as follows:
(i) It is shown on the debit side of Profit &Loss A/c
(ii) It is deducted from the debtors on the assets side of Balance Sheet

Accrued Income : The income which has become due but not yet received in cash is called accrued income. It is also called outstanding income or income earned but not yet received. Accrued income is shown in the assets side of balance sheet For example : interest on investment has become due but not yet received.
For accrued income following adjustment entry is passed:
Accrued Income A/c         Dr.
     To Income A/c
(Being accrued income recorded)

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) 

The term 'stock' refers to the goods lying with the firm on a particular date. It may be of raw materials, semi-finished goods and finished goods. According to lASC-inventories are tangible property (i) held for sale in the ordinary course of business, (ii) in the process of production for such sale, (iii) to be consumed in the production of goods or services for sale.