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What is the treatment of this adjustment in final accounts. An overdraft is secured against stock. Bank overdraft as on 31.3.2019 is considered as 80%of real value of closing stock(deducting 20% as margin) and after adjusting margin 80% of same has been allowed to draw as an overdraft. Overdraft given in trial balance is 80,000?
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What is the treatment of this adjustment in final accounts. An overdra...
Treatment of Overdraft Secured Against Stock in Final Accounts
Assuming that the closing stock is valued at Rs. 1,00,000, the adjustment for the overdraft secured against stock can be made as follows:
Step 1: Calculate the real value of closing stock
Real value of closing stock = Closing stock x (100/80)
= Rs. 1,00,000 x (100/80)
= Rs. 1,25,000
Step 2: Deduct 20% as margin
Margin = Real value of closing stock x 20%
= Rs. 1,25,000 x 20%
= Rs. 25,000
Real value of closing stock after deducting margin = Rs. 1,00,000
Step 3: Calculate the amount of overdraft allowed
Amount allowed to draw as overdraft = Real value of closing stock after deducting margin x 80%
= Rs. 1,00,000 x 80%
= Rs. 80,000
Step 4: Compare the amount allowed to draw as overdraft with the actual overdraft
Actual overdraft given in trial balance = Rs. 80,000
Since the amount allowed to draw as overdraft is the same as the actual overdraft, there is no need for any further adjustment.
Conclusion
In the final accounts, the overdraft secured against stock will be shown as follows:
Particulars Amount
Overdraft (given in trial balance) Rs. 80,000
Less: Margin (20% of real value of closing stock) Rs. 25,000
Amount allowed to draw as overdraft Rs. 80,000
Closing stock (real value after deducting margin) Rs. 1,00,000
Note: The closing stock figure used in the trading and profit and loss account will be the real value after deducting the margin.
Assuming that the closing stock is valued at Rs. 1,00,000, the adjustment for the overdraft secured against stock can be made as follows:
Step 1: Calculate the real value of closing stock
Real value of closing stock = Closing stock x (100/80)
= Rs. 1,00,000 x (100/80)
= Rs. 1,25,000
Step 2: Deduct 20% as margin
Margin = Real value of closing stock x 20%
= Rs. 1,25,000 x 20%
= Rs. 25,000
Real value of closing stock after deducting margin = Rs. 1,00,000
Step 3: Calculate the amount of overdraft allowed
Amount allowed to draw as overdraft = Real value of closing stock after deducting margin x 80%
= Rs. 1,00,000 x 80%
= Rs. 80,000
Step 4: Compare the amount allowed to draw as overdraft with the actual overdraft
Actual overdraft given in trial balance = Rs. 80,000
Since the amount allowed to draw as overdraft is the same as the actual overdraft, there is no need for any further adjustment.
Conclusion
In the final accounts, the overdraft secured against stock will be shown as follows:
Particulars Amount
Overdraft (given in trial balance) Rs. 80,000
Less: Margin (20% of real value of closing stock) Rs. 25,000
Amount allowed to draw as overdraft Rs. 80,000
Closing stock (real value after deducting margin) Rs. 1,00,000
Note: The closing stock figure used in the trading and profit and loss account will be the real value after deducting the margin.
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What is the treatment of this adjustment in final accounts. An overdraft is secured against stock. Bank overdraft as on 31.3.2019 is considered as 80%of real value of closing stock(deducting 20% as margin) and after adjusting margin 80% of same has been allowed to draw as an overdraft. Overdraft given in trial balance is 80,000?
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What is the treatment of this adjustment in final accounts. An overdraft is secured against stock. Bank overdraft as on 31.3.2019 is considered as 80%of real value of closing stock(deducting 20% as margin) and after adjusting margin 80% of same has been allowed to draw as an overdraft. Overdraft given in trial balance is 80,000? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about What is the treatment of this adjustment in final accounts. An overdraft is secured against stock. Bank overdraft as on 31.3.2019 is considered as 80%of real value of closing stock(deducting 20% as margin) and after adjusting margin 80% of same has been allowed to draw as an overdraft. Overdraft given in trial balance is 80,000? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for What is the treatment of this adjustment in final accounts. An overdraft is secured against stock. Bank overdraft as on 31.3.2019 is considered as 80%of real value of closing stock(deducting 20% as margin) and after adjusting margin 80% of same has been allowed to draw as an overdraft. Overdraft given in trial balance is 80,000?.
What is the treatment of this adjustment in final accounts. An overdraft is secured against stock. Bank overdraft as on 31.3.2019 is considered as 80%of real value of closing stock(deducting 20% as margin) and after adjusting margin 80% of same has been allowed to draw as an overdraft. Overdraft given in trial balance is 80,000? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about What is the treatment of this adjustment in final accounts. An overdraft is secured against stock. Bank overdraft as on 31.3.2019 is considered as 80%of real value of closing stock(deducting 20% as margin) and after adjusting margin 80% of same has been allowed to draw as an overdraft. Overdraft given in trial balance is 80,000? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for What is the treatment of this adjustment in final accounts. An overdraft is secured against stock. Bank overdraft as on 31.3.2019 is considered as 80%of real value of closing stock(deducting 20% as margin) and after adjusting margin 80% of same has been allowed to draw as an overdraft. Overdraft given in trial balance is 80,000?.
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