Adjustment of Wages Including Expenditure on Cycle Shed

Introduction

When the wages paid to the employees include an additional expenditure, such as the erection of a cycle shed, it is important to make necessary adjustments in the accounting records.

Explanation

The expenditure incurred on the erection of a cycle shed for the employees and customers is a capital expenditure, as it adds value to the business and benefits the company in the long run. However, since it is a one-time expense, it cannot be treated as a regular expense in the books of accounts.

Adjustment Entries

To adjust the wages in the accounting records, the following entries need to be made:

1. Increase in Capital Expenditure:
- Debit: Cycle Shed Account (Capital Expenditure)
- Credit: Bank Account

2. Decrease in Expenses:
- Debit: Cycle Shed Account (Capital Expenditure)
- Credit: Profit and Loss Account (Expenses)

3. Increase in Assets:
- Debit: Cycle Shed Account (Capital Expenditure)
- Credit: Fixed Assets Account

Conclusion

Making necessary adjustments in the accounting records for the expenditure incurred on the erection of a cycle shed is crucial to maintain accurate financial records. By making the above entries, the wages can be adjusted appropriately, and the financial statements can reflect the true financial position of the company.

Cycle shed a/c Dr 2000
To wages a/c 2000
(being adjustment entry passed)