i dont knw about past adjustments topic

Asked by Angel | 23rd Jan, 2017, 07:10: PM

Expert Answer:

After closing the books of accounts of the firm, it may happen that some errors or mistake are discovered. In this case, the firm rectifies the error or mistake by passing adjusting entries in the beginning of the financial year instead of altering the final accounts which have already been closed. These adjustments are called past adjustment because it is related to the past period.

For Example, interest on capital/drawing have been omitted, interest on capital/drawing have been allowed/charged at a higher or lower rate, Profits or losses have been distributed among the partners in a wrong ratio, etc.        

Answered by Heta Desai | 24th Jan, 2017, 12:11: PM