Explanation:

In this scenario, materials worth ₨5,000 and wages worth ₨2,000 have been used to create Tools and Implements for use in the factory. However, no adjustments were made in the books to reflect this transaction. This means that the company's financial statements may not accurately reflect the true financial position of the business.

Adjustments Needed:

To rectify this situation and ensure that the company's financial statements are accurate, the following adjustments need to be made:

1. Materials Used: The cost of materials used in creating the Tools and Implements should be transferred from the Materials account to the Tools and Implements account.

2. Wages Paid: The cost of wages paid to create the Tools and Implements should be transferred from the Wages account to the Tools and Implements account.

3. Depreciation on Tools and Implements: Since the Tools and Implements will be used for a long period of time, they will need to be depreciated. A certain amount of depreciation should be charged each year to reflect the decrease in the value of the Tools and Implements.

4. Adjustment Entries: After making the above entries, adjustment entries should be made to balance the accounts affected by the transactions.

Importance of Adjustments:

Making these adjustments is important because it ensures that the company's financial statements accurately reflect the true financial position of the business. Without these adjustments, the financial statements will be misleading, and investors and other stakeholders may make decisions based on incorrect information.

Conclusion:

In conclusion, it is important to make adjustments in the books when transactions occur, to ensure that the financial statements accurately reflect the true financial position of the business. In this scenario, adjustments need to be made to reflect the cost of materials and wages used to create Tools and Implements for use in the factory.

Tools and implement a/c