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FACC 1

UNIT III

Single Entry System of Book Keeping Accounting from Incomplete Records

 


Single entry system of book-keeping is not a system at all. It means recording transactions not according to well defined rules but according to mere convenience. Under the Double Entry System, a transaction must be recorded with both the aspects. If there is debit, there must be a credit and vice-versa. It is not under the single-entry system. Debit and credit may be completed in transactions, while no record at all may be there in respect of a number of transactions. Most transactions are recorded only once without completed double entry. It is all a matter of convenience. Accounts are not maintained. While there is no hard and fast rule; usually only the cash account, bank (sometimes the pass book is treated as sufficient for this purpose) and personal account (that is, account of customers and creditors) are kept. Generally, there will be no accounts to show purchases, sales, assets, incomes and losses and expenses.

Joint stock companies cannot keep books on the Single-Entry System under law, but sole proprietorships and partnerships may, if they so wish, adopt this system. But unless the firm is very small, it is not desirable to do so.

 

How to ascertain profit?

Ascertainment of-profit or loss under this system is really simple. “Suppose I start a business on 1st January, 2002 with Rs. 20,000. On 31st December 2002 I find that may capital is Rs. 25,000 (for finding out capital see below). This surely means that I have made a profit of Rs. 5,000; the capital could not have grown otherwise. But suppose I brought an additional Rs. 4,000 as capital during the year. This explains the increases in capital to this extent. This brings down the profit to Rs. 1,000. One thing more I must have drawn some money for private use. Suppose the figure is Rs.500 per month or Rs. 6,000 for the year. Had this money not been drawn, the capital would have been Rs. 31,000 and the profit earned would have been Rs. 7,000. The formula to find out profit, therefore, is:

 

 

Rs.

Rs.

Capital at the end of the year

 

25,000

Add: Drawings during the year

 

6,000

 

 

31,000

Less: Flesh Capital introduced

4,000

 

Capital in the beginning of the year

20,000

24,000

Profit during the year

 

7,000

 

 

Key takeaways:

  1. Single entry system of book-keeping is not a system at all.
  2. It means recording transactions not according to well defined rules but according to mere convenience.
  3.  Under the Double Entry System, a transaction must be recorded with both the aspects. If there is debit, there must be a credit and vice-versa.
  4.  It is not under the single-entry system. Debit and credit may be completed in transactions, while no record at all may be there in respect of a number of transactions

 


Characteristic features of Entry system are:

(I) This system is followed by a sole proprietorship or partnership company. Companies cannot follow this system.

(II) The system maintains only one cashbook that confuses both private and business transactions.

(III) Normally, only personal accounts are recorded. That is, the real and nominal accounts are ignored.

(IV) Notice the lack of unity if the account is held in single-entry bookkeeping

(V) This system allows you to see profits or losses, but not the overall financial position.

(VI) Since the trial balance cannot be created, the arithmetic accuracy of the account is impossible.

(VII) In reality, this system is a mixture of single-entry bookkeeping, double-entry bookkeeping, and single-entry bookkeeping.

 

Advantages of single-entry system:

(I) The system is so simple that anyone can maintain it without sufficient accounting knowledge.

(II) A limited account is opened in this system because transactions related to personal accounts are recognized rather than real and nominal accounts.

(III) Due to the limited number of books, the costs associated with keeping records are also negligible.

(IV) Very useful when accounting for events such as household chores, socializing, and festivals.

 

Disadvantages: This Single-Entry system has the following disadvantages:

  1. Since there is no trail balance, there is no proof of accuracy.
  2. Profit or losses cannot be ascertained properly because of lack of information about purchases, sales, expenses, etc.
  3. Since accounts relating to assets (furniture, office equipment, etc.) are not maintained, there is no control over such assets. This may result in wastages and misappropriation.
  4. The Balance Sheet (called Statement of Affairs here) can be prepared only with difficulty and that loo without sufficient accuracy.
  5. Useful comparison for the guidance of management cannot be made because relevant information will generally be missing.

 

How to Ascertain Capital?

Capital is really assets minus liabilities. Under the Single-Entry System also, capital is ascertained in this manner. Statement of Affairs (not at all different from balance sheet) is prepared and assets and liabilities put on the proper sides. The difference between assets and liabilities is capital. Personal account and cash account are usually maintained and hence the amount of sundry debtors, cash balance, bank balance and sundry creditors will be readily available. The amount of other assets can be ascertained only by physical inspection.

 

Key takeaways:

  1. This system is followed by a sole proprietorship or partnership company. Companies cannot follow this system.
  2.  The system maintains only one cashbook that confuses both private and business transactions.
  3.  Normally, only personal accounts are recorded. That is, the real and nominal accounts are ignored.
  4. Capital is really assets minus liabilities. Under the Single-Entry System also, capital is ascertained in this manner.
  5. Profit or losses cannot be ascertained properly because of lack of information about purchases, sales, expenses.
  6. The system is so simple that anyone can maintain it without sufficient accounting knowledge.

 


This Method is to be used when the summaries of cash transactions are given: -

Under conversion method, Trading & Profit & Loss Account & Balance sheet can be prepared by converting the single-entry system in to Double entry system. 

For converting single entry system in to Double entry system the missing items are to be found out by preparing the relevant ledger Account as discussed from points 1.5 to 1.10.

 

Steps for Conversion into Double Entry

If the books are maintained on Single Entry basis, they can be converted into double entry basis but with good deal of effort. Assuming that accounts of cash, bank, customers and suppliers have been maintained, the following steps will be necessary:

 

  1. Take the statement of affairs at the end of previous year. Open all accounts (except those already opened) with proper balances.
  2. Go through the cash book (or cash and bank accounts). Excepting transaction, with customers and suppliers (these transactions must have been posted already) others should be posted to proper accounts. Cash sales will be on the debit side of the Cash Book.
  3. Credit Sales plus Cash Sales give you total sales. Examination of the credit side of the Cash Book will also reveal wages, carnage inwards, etc., which will be debited to the Trading Account. Thus, all information to prepare Trading Account becomes available and gross profit will be ascertained.
  4. This is put on the credit side of the Profit and Loss Account. Credit side of the Cash Book reveals expenses. These expenses after proper adjustments (for expenses prepaid or outstanding) will be debited to the Profit and Loss A/c.
  5. Debit side of the Cash Book will reveal income (such as sale of old newspapers.) These will be put on the credit side of the Profit and Loss A/c. The profit and Loss A/c should also be debited with any depreciation which has to be written off. Thus, net profit or net loss can be ascertained. Thus, will be transferred to the Capital Account.
  6. Preparation of Balance Sheet is easy. The previous Statement of Affairs will reveal the various assets. The assets adjusted for depreciation and disposal (see debit side of Cash Book) and new acquisition (see credit side of the Cash Book) will be put in the Balance sheet at the end of the year. The balance for cash, debtors, stock and creditors will be given as at the end of the year. These will put down in the Balance Sheet.
  7. Capital will be as per previous Statement of Affairs adjusted for net profit or net loss and drawings (see credit side of Cash Book).

 

Opening Balance sheet/Statement of Affairs:

 if not given (For Ascertaining Opening Capital)

 

Cash/Bank A/c:

If agreed summary is not given. To ascertain the closing Balance of Cash/Bank)

 

Total Debtors Account:

 To ascertain either Credit Sales or Closing Balance or Opening Balance of Debtors or Cash received from Debtors.

*All the relevant figures will be given in the question except any one of the above

 

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

To Balance b/d

XX

By Cash & Cheque Received

XX

To Credit sales

XX

By Discount Received

XX

To Discount Allowed

XX

By Bills Receivable (Drawn)

XX

To Creditors (Dishonour of B/R Endorsed)

XX

By Return Inwards

XX

To Bank (Cheque Dishonoured)

XX

By Bad Debts Written Off

XX

To Bills Receivable (Dishonoured)

XX

By Balance c/d

XX

TOTAL

XX

TOTAL

XX

 

 

The following items will not affect Total Debtors Account: -

a)     Cash sales

b)    Reserve for discount on Debtors

c)     R.D.D

d)    Bad Debt previously written off but now recovered.

e)     Bills receivable Honoured

f)       Bills receivable Dishonoured

g)    Bill receivable endorsed

h)     Bills receivable sent to bank for collection

 

Total Creditors Account:

To ascertain either Credit Purchases or Closing Balance or Opening Balance of Creditors or Cash paid to Creditors.

 

*All the relevant figures will be given in the question except any one of the above

 

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

To Cash/Bank Account

XX

By Balance b/d

XX

To Discount received

XX

By Credit Purchase

XX

To Bills Payable (Accepted)

XX

By Bank Account (Dishonoured of Cheques)

XX

To Bills Receivable (Endorsed)

XX

By Bills Payable (Dishonoured)

XX

To Return Outwards

XX

By Debtors (Dishonour of bills receivable endorsed)

XX

To Balance c/d

XX

 

 

TOTAL

XX

TOTAL

XX

The following items will not affect total Creditors Account: -

a)     Cash Purchase

b)    Reserve for Discount on Creditors

c)     Bills Payable honoured

Note: - if bills receivable Endorsed it is debited to creditors A/c on dishonoured of B/R endorsed Creditor's A/c. is credited by debiting Debtors A/c.

 

Bills Receivable Account:

To ascertain Either Opening Balance or Closing Balance or Bills Drawn.

 

*All the relevant figures will be given in the question except any one of the above

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

To Balance b/d

XX

By Cash/Bank (Honouring)

XX

To Debtors a/c for B/R received

XX

By Cash/Bank (Discounting)

XX

 

 

By Debtors (Dishonoured)

XX

 

 

By Discount (Discounting)

XX

 

 

By Creditors (B/R ENDORSED)

XX

 

 

By Bank for Collection

XX

 

 

By Balance c/d

XX

TOTAL

XX

TOTAL

XX

 

 

Bills Payable Account:

To ascertain Either Opening Balance or Closing Balance or Bills Accepted.

 

*All the relevant figures will be given in the question except any one of the above

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

To Cash/Bank. (Honouring)

XX

 By Balance b/d

XX

To Creditors (Dishonoured)

XX

By Creditors for Bills Payable accepted

XX

To Balance c/d

XX

 

 

TOTAL

XX

TOTAL

XX

 

Key takeaways:

  1. This Method is to be used when the summary of cash transactions are given.
  2. Under conversion method, Trading & Profit & Loss Account & Balance sheet can be prepared by converting the single-entry system in to Double entry system. 
  3. If the books are maintained on Single Entry basis, they can be converted into double entry basis but with good deal of effort.
  4. Assuming that accounts of cash, bank, customers and suppliers have been maintained

 

Solved Examples:

Q1) You are given

1)     The balance sheet of N. Swami on 31.12.2004

2)     Cash Transaction for the year up to 31.12.2005

3)     A Summary of the remaining transaction

 

 BALANCE SHEET AS ON 31/12/2004

LIABILITIES

AMOUNT

AMOUNT

ASSETS

AMOUNT

AMOUNT

Capital

 

19,600

Cash

 

800

 

 

 

Stock

 

7,500

Creditors

 

3,600

Debtors

 

3,900

 

 

 

Machinery

 

4,000

 

 

 

Land & Building

 

7,000

TOTAL

 

23,200

TOTAL

 

23,200

 

Dr.  SUMMARY OF CASH TRANSACTION.         Cr.

Particulars

Amount

Particulars

Amount

Opening Balance

800

Payment to creditors

14,700

Received from Debtors

29,000

 Wages

1,580

Cash Sales

3,700

Salaries

4,900

 

 

Drawing

4,500

 

 

Office expenses

890

 

 

Investment

1,730

 

 

Closing Balance

5,200

TOTAL

33,500

TOTAL

33,500

 

Other transaction: -

Sales (Credit) Rs. 40,760, Discount to Customer Rs.200, Purchased Rs. 30,000, Discount Received Rs.100, Closing Stock of Goods Rs. 5,300

Provide for depreciation on P&M @ 5% and Land and Building @ 2.5%

Prepare the Trading A/c, P&L A/c. and Balance sheet.

 

SOLUTION: -

Dr.     TRADING A/c.          Cr.

PARTICULARS

AMOUNT

AMOUNT

PARTICULARS

AMOUNT

AMOUNT

To Opening Stock

 

7,500

By Sales

 

 

To Purchase

 

 

Cash

3,700

 

Cash

-

 

Credit

40,760

44,460

Credit

30,000

30,000

 

 

 

To Wages

 

1,580

By Closing Stock

 

5,300

To Gross Profit

 

10,680

 

 

 

TOTAL

 

49,760

TOTAL

 

49,760

 

Dr.    PROFIT AND LOSS A/c.          Cr.

PARTICULARS

AMOUNT

AMOUNT

PARTICULARS

AMOUNT

AMOUNT

To Salaries

 

4,900

By Gross Profit

 

10,680

To Discount Allowed

 

200

By Discount Received

 

100

To Office Expenses

 

890

 

 

 

To Depreciation

Machinery

Building

200

175

375

 

 

 

To NET PROFIT

 

4,415

 

 

 

TOTAL

 

10,780

TOTAL

 

10,780

 

BALANCE SHEET AS ON 31/12/2007

LIABILITIES

AMOUNT

AMOUNT

ASSETS

AMOUNT

AMOUNT

Capital

19,600

 

Machinery

4,000

 

Add: - NET PROFIT

4,415

 

Less: - Depn @ 5%

200

3,800

Less: - Drawing

(4,500)

19,515

Building

7,000

 

 

 

 

Less: - Depn @ 2.5%

175

6,825

 

 

 

Debtors

 

15,460

Creditors

 

18,800

Investment

 

1,730

 

 

 

Closing Stock

 

5,300

 

 

 

Cash

 

5,200

TOTAL

 

38,315

TOTAL

 

38,315

 

WORKING NOTE: -

Dr.     DEBTORS A/c.          Cr.

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

To Balance b/d

3,900

By Cash Received

29,000

To Credit sales

40,760

By Discount Allowed

200

 

 

By Balance c/d

15,460

TOTAL

34,660

TOTAL

34,660

 

Dr.          CREDITORS A/c.          Cr.

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

To Cash

14,700

By Balance b/d

3,600

To Discount Received

100

By Credit Purchase

30,000

To Balance c/d

18,800

 

 

TOTAL

33,600

TOTAL

33,600

 

 

Q2) Amar did not keep proper books of account. However, he gives you the following information relating 2007: -

Assets & Liabilities

1.1.07

31.12.07

Cash at bank

1,000

1,800

Stock

20,000

19,500

Sundry Debtors

15,000

16,000

Machinery

40,000

-----

Sundry Creditors

20,000

18,000

 

Dr.  SUMMARY OF CASH TRANSACTION.         Cr.

Particulars

Amount

Particulars

Amount

Opening Balance

1,000

Payment to creditors

35,000

Received from Debtors

76,500

 Wages

15,100

Cash Sales

8,200

Salaries.  and Expenses

11,600

Sales of Newspaper

200

Building Purchased

20,000

Loan from Mrs Amar (@ 9% on 1.10.07)

6,000

Domestic expenses

8,400

 

 

Closing Balance

1,800

During the year Rs. 600 had to be written off as bad. Machinery is to be depreciated @ 15% p.a. Expenses owing are Rs. 800. Prepare Amar's Trading & profit & Loss Account & Balance sheet relating to 2007.

 

SOLUTION: -

Dr.     TRADING A/c.          Cr.

PARTICULAR

AMOUNT

AMOUNT

PARTICULAR

AMOUNT

AMOUNT

To Opening Stock

 

20,000

By Sales

 

 

To Purchase

 

 

Cash

8,200

 

Cash

-

 

Credit

77,500

85,700

Credit

33,000

33,000

 

 

 

To Wages

 

15,100

By Closing Stock

 

19,500

To Gross Profit

 

37,100

 

 

 

TOTAL

 

1,05,200

TOTAL

 

1,05,200

 

Dr.    PROFIT AND LOSS A/c.          Cr.

PARTICULARS

AMOUNT

AMOUNT

PARTICULARS

AMOUNT

AMOUNT

To Interest on Loan

 

135

By Gross Profit

 

37,100

To Salaries & Expenses

11,600

 

By Sale of News paper

 

200

Add: - O/S Expenses

800

12,400

 

 

 

To Domestic expenses

 

8,400

 

 

 

To Bad Debt

 

600

 

 

 

To Depn on Machinery

 

6,000

 

 

 

To NET PROFIT

 

9,765

 

 

 

TOTAL

 

37,300

TOTAL

 

37,300

   

BALANCE SHEET AS ON 31/12/2007

LIABILITIES

AMOUNT

AMOUNT

ASSETS

AMOUNT

AMOUNT

Capital

56,000

 

Machinery

40,000

 

Add: - NET PROFIT

9,765

65,765

Less: - Depn @15%

6,000

34,000

 

 

 

Building

 

20,000

O/S Expenses

 

800

Debtors

16,000

 

Creditors

 

18,000

Less: - Bad Debt

600

15,400

Loan from Mrs Amar

6,000

 

Closing Stock

 

19,500

Add: - Int on Loan

135

6,135

Cash

 

1,800

TOTAL

 

90,700

TOTAL

 

90,700

 

WORKING NOTE: -

BALANCE SHEET AS ON 31/12/2006

LIABILITIES

AMOUNT

AMOUNT

ASSETS

AMOUNT

AMOUNT

Capital (Bal.Fig.)

 

56,000

Cash

 

1,000

 

 

 

Stock

 

20,000

Creditors

 

20,000

Debtors

 

15,000

 

 

 

Machinery

 

40,000

TOTAL

 

76,000

TOTAL

 

76,000

 

Dr.             DEBTORS A/c.     Cr.

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

To Balance b/d

15,000

By Cash & Cheque Received

76,500

To Credit sales

77,500

By Balance c/d

16,000

 

 

 

 

TOTAL

92,500

TOTAL

92,500

 

Dr.          CREDITORS A/c.          Cr.

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

To cash

35,000

By Balance b/d

20,000

To Balance c/d

18,000

By Credit Purchase

33,000

TOTAL

53,000

TOTAL

53,000

 

 

Q3). Ashutosh carries on small business, but he does not maintain a complete set of account books. He banks all receipts and makes all payments only by means of cheques. He maintains properly a Cash book, Sales Ledger, and Purchase Ledger. He also makes close of every accounting year. From such records you are able together following facts:

 

Receipts for the year ended 31.12.2011

From Sundry Debtors

17,625

Cash Sales

4,125

Paid in by Ashutosh, the proprietor

2,500

TOTAL

24,250

 

PAYMENT MADE IN THE YEAR ENDED 31.12.2011.

New Plant Purchase

625

Drawings

1,500

Wages

6,725

Salaries

1,125

Interest paid

75

Telephones

125

Rent

1,200

Light and Power

475

Sundry expenses

2,125

Sundry creditors (Purchase ledger accounts)

7,625

 

PARTICULARS

31.12.2010

31.12.2011

Sundry Creditors

2525

2,400

Sundry Debtors

3,750

6,125

Bank

625

NIL

Stock

6,250

3,125

Plant

7,500

7,315

From the above data, prepare Profit and Loss A/c for year ended 31st Dec, 2011 and Balance Sheet as on that date.

 

SOLUTION:

Dr.     TRADING A/c.          Cr.

PARTICULARS

AMOUNT

AMOUNT

PARTICULARS

AMOUNT

AMOUNT

To Opening Stock

 

6,250

By Sales

 

 

To Purchase

 

7,500

Cash

4,125

 

To Wages

 

6,725

Credit

20,000

24,125

To Light & Power

 

475

 

 

 

To Gross Profit

 

6,300

By Closing Stock

 

3,125

 

 

 

 

 

 

TOTAL

 

27,250

TOTAL

 

27,250

 

 

Dr.     PROFIT AND LOSS A/c.         Cr.

PARTICULARS

AMOUNT

AMOUNT

PARTICULARS

AMOUNT

AMOUNT

To Salaries

 

1,125

By Gross Profit

 

6,300

To Interest

 

75

 

 

 

To Telephones Exp

 

125

 

 

 

To Rent

 

1,200

 

 

 

To Sundry Expense

 

2,125

 

 

 

To Depreciation

 

810

 

 

 

To NET PROFIT

 

840

 

 

 

 

 

 

 

 

 

TOTAL

 

6,300

TOTAL

 

6,300

 

BALANCE SHEET AS ON 31/12/2011

LIABILITIES

AMOUNT

AMOUNT

ASSETS

AMOUNT

AMOUNT

Capital

15,600

 

Plant

7,500

 

 

 

 

Add: - Purchase

625

 

Add: - NET PROFIT

840

 

Less: - Depn

810

7,315

Less: - Drawing

(1,500)

 

Debtors

 

6,125

Add: - ADI

2500

17,440

Closing Stock

 

3,125

 

 

 

Bank

 

3,275

Creditors

 

2,400

 

 

 

 

 

 

 

 

 

TOTAL

 

19,840

TOTAL

 

19,840

 

WORKING NOTE: -

BALANCE SHEET AS ON 01/01/2011

LIABILITIES

AMOUNT

AMOUNT

ASSETS

AMOUNT

AMOUNT

Capital (Bal.Fig.)

 

15,600

Bank

 

625

 

 

 

Stock

 

6,250

Creditors

 

2,525

Debtors

 

3,750

 

 

 

Plant

 

7,500

TOTAL

 

18,125

TOTAL

 

18,125

 

Dr.             DEBTORS A/c.     Cr.

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

To Balance b/d

3,750

By Cash & Cheque Received

17,625

To Credit sales (Bal Fig)

20,000

By Balance c/d

6,125

 

 

 

 

TOTAL

23,750

TOTAL

23,750

 

Dr.          CREDITORS A/c.          Cr.

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

To Cash/Bank

7,625

By Balance b/d

2,525

To Balance c/d

2,400

By Credit Purchase (Bal Fig)

7,500

TOTAL

10,025

TOTAL

10,025

 

Dr.          CASH/BANK A/c.             Cr.

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

To Balance b/d

625

By Plant(Purchased)

625

To Debtors A/c (Receipt)

17,625

By Drawings

1,500

To Cash Sales

4,125

By Wages

6,725

To Capital Introduced (Additional)

2,500

By Salaries

1,125

 

 

By Interest Paid

75

 

 

By Telephone Expenses

125

 

 

By Rent

1,200

 

 

By Light & Power

475

 

 

By Sundry Expenses

2,125

 

 

By Creditors(Payment)

7,625

 

 

By Balance c/d (Bal Fig)

3,275

 

 

 

 

TOTAL

24,875

TOTAL

24,875

 

 

Q4) Amisha did not maintain her books of accounts properly. From the following data supplied to you prepare Final Accounts for the year ended 31.12.11

 

PARTICULARS

AMOUNT

Opening Stock 1.1.11

10,000

Cash on Hand 1.1.11

5,000

Creditors of Furniture & Fixtures on 1.1.11(Dep@10%)

2,000

Rent (paid for 10 months)

1,000

Cash received from Debtors (after allowing 2% disc)

29,400

Cash paid to Creditors (after receiving 3% disc)

17,460

Bad Debts previously written off now recovered

200

Cash Purchases

3,000

Credit Purchases

30,000

Debtors on 31.12.11

12,000

Drawings

5,000

Donations

1,000

Sales (80% Credit Sales)

50,000

Commission Received

1,000

Rate of G.P on Sales

20%

 

SOLUTION:

Dr.     TRADING A/c.          Cr.

PARTICULARS

AMOUNT

AMOUNT

PARTICULARS

AMOUNT

AMOUNT

To Opening Stock

 

10,000

By Sales

 

 

To Purchase

 

 

Cash

10,000

 

Cash

3,000

 

Credit

40,000

50,000

Credit

30,000

33,000

 

 

 

To Gross Profit

(20% of 50,000)

 

10,000

By Closing Stock (Bal Fig)

 

3,000

 

 

 

 

 

 

TOTAL

 

53,000

TOTAL

 

53,000

 

Dr.     PROFIT AND LOSS A/c.         Cr.

PARTICULARS

AMOUNT

AMOUNT

PARTICULARS

AMOUNT

AMOUNT

To Rent

1,000

 

By Gross Profit

 

10,000

Add: O/s Rent

(2 months)

200

1,200

By Bad Debts Recovered

 

200

To Disc Allowed

 

600

By Disc Received

 

540

To Donations

 

1,000

By Commission

 

1000

To Depreciation

 

200

 

 

 

To NET PROFIT

 

8,740

 

 

 

 

 

 

 

 

 

TOTAL

 

11,740

TOTAL

 

11,740

 

BALANCE SHEET AS ON 31/12/2011

LIABILITIES

AMOUNT

AMOUNT

ASSETS

AMOUNT

AMOUNT

Capital

17,000

 

Furniture

2,000

 

 

 

 

Less: Depreciation

200

1,800

Add: - NET PROFIT

8,740

 

(10% of 2000)

 

 

Less: - Drawing

5,000

20,740

Debtors

 

12,000

 

 

 

Closing Stock

 

3,000

Outstanding Rent

 

200

Cash/Bank

 

18,140

Creditors

 

14,000

 

 

 

 

 

 

 

 

 

TOTAL

 

34,940

TOTAL

 

34,940

 

WORKING NOTE: -

BALANCE SHEET AS ON 01/01/2011

LIABILITIES

AMOUNT

AMOUNT

ASSETS

AMOUNT

AMOUNT

Capital (Bal.Fig.)

 

17,000

Cash/Bank

 

5,000

 

 

 

Stock

 

10,000

Creditors

 

2,000

Debtors

 

2,000

 

 

 

Furniture

 

2,000

TOTAL

 

19,000

TOTAL

 

19,000

 

Dr.             DEBTORS A/c.     Cr.

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

To Balance b/d (Bal Fig)

2,000

By Cash & Cheque Received

29,400

To Credit sales (80% of 50,000)

40,000

By Disc Allowed

600

 

 

By Balance c/d

12,000

TOTAL

42,000

TOTAL

42,000

 

Dr.          CREDITORS A/c.          Cr.

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

To Cash/Bank

17,460

By Balance b/d

2,000

To Disc Received

540

By Credit Purchase

30,000

To Balance c/d (Bal Fig)

14,000

 

 

TOTAL

32,000

TOTAL

32,000

 

Dr.          CASH/BANK A/c.             Cr.

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

To Balance b/d

5,000

By Cash Purchases

3,000

To Debtors A/c (Receipt)

29,400

By Drawings

5,000

To Cash Sales

10,000

By Rent

1,000

To Bad Debts Recovered

200

By Creditors(Payment)

17,460

To Commission Received

1,000

By Donations

1,000

 

 

By Balance c/d (Bal Fig)

18,140

 

 

 

 

TOTAL

45,600

TOTAL

45,600

 

 

Q5) You are given

a. Opening Balance Sheet as on 1.4.2013

b. Cash Account for the year ended 31.3.2014

c. Additional Information

Prepare Final Accounts of Mr. Sahil Khan

 

BALANCE SHEET AS ON 01/03/2013

LIABILITIES

AMOUNT

AMOUNT

ASSETS

AMOUNT

AMOUNT

Capital

 

1,80,000

Cash

 

9,000

Bills Payable

 

72,000

Bank

 

18,000

Creditors

 

36,000

Stock

 

36,000

 

 

 

Debtors

 

45,000

 

 

 

Bills Receivable

 

36,000

 

 

 

Furniture

 

18,000

 

 

 

Plant

 

1,26,000

 

 

 

 

 

 

TOTAL

 

2,88,000

TOTAL

 

2,88,000

 

Dr.          CASH/BANK A/c.             Cr.

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

To Balance b/d

27,000

By Bills Payable

1,08,000

To Debtors A/c (Receipt)

1,44,000

By Drawings

21,600

To Cash Sales

63,000

By Rent, Rates & Taxes

36.000

To Bills Receivable

1,35,000

By Creditors(Payment)

63,000

To Commission Received

 

By Wages

36,000

 

 

By Sundry Expenses

54,000

 

 

By Balance c/d

50,400

 

 

 

 

TOTAL

3,69,000

TOTAL

3,69,000

 

Additional Information

Rs.

Debtors as on 31st March, 2015

72,000

Creditors as on 31st March, 2015

45,000

Bills Receivable as on 31st March, 2015

54,000

Bills Payable as on 31st March, 2015

90,000

Stock as on 31st March, 2015

54,000

Discount Allowed

1,800

Discount Received

3,600

Bills Receivable Endorsed

27,000

Bills Receivable in Hand Dishonoured during the year

9,000

Bills Receivable Endorsed Dishonoured

3,600

Bills Payable Dishonoured during the year

3,600

 

SOLUTION:

Dr.     TRADING A/c.          Cr.

PARTICULARS

AMOUNT

AMOUNT

PARTICULARS

AMOUNT

AMOUNT

To Opening Stock

 

36,000

By Sales

 

 

To Purchase

 

2,25,000

Cash

63,000

 

To Wages

 

36,000

Credit

3,49,200

4,12,200

 

 

 

 

 

 

To Gross Profit

 

1,69,200

By Closing Stock

 

54,000

 

 

 

 

 

 

TOTAL

 

4,66,200

TOTAL

 

4,66,200

 

Dr.    PROFIT AND LOSS A/c.            Cr.

PARTICULARS

AMOUNT

AMOUNT

PARTICULARS

AMOUNT

AMOUNT

To Sundry Exps

 

54,000

By Gross Profit

 

1,69,200

To Rent, Rates & Tax

 

36,000

 

 

 

To Disc Allowed

 

1,800

By Disc Received

 

3,600

To NET PROFIT

 

81,000

 

 

 

 

 

 

 

 

 

TOTAL

 

1,72,800

TOTAL

 

1,72,800

 

BALANCE SHEET AS ON 31/03/2015

LIABILITIES

AMOUNT

AMOUNT

ASSETS

AMOUNT

AMOUNT

Capital

1,80,000

 

Furniture

 

18,000

 

 

 

Plant

 

1,26,000

Add: - NET PROFIT

81,000

 

Bills Receivable

 

54,000

Less: - Drawing

21,600

2,39,400

Debtors

 

72,000

 

 

 

Closing Stock

 

54,000

Bills Payable

 

90,000

Cash/Bank

 

50,400

Creditors

 

45,000

 

 

 

 

 

 

 

 

 

TOTAL

 

3,74,400

TOTAL

 

3,74,400

 

WORKING NOTE: -

Dr.             DEBTORS A/c.     Cr.

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

To Balance b/d

45,000

By Cash & Cheque Received

1,44,000

To Bills Receivable(Dishonor)

9,000

By Disc Allowed

1,800

To Creditors (Endorsed Bill Dishonored)

3,600

By Bills Receivable

1,89,000

To Credit sales (Bal Fig)

3,49,200

 

 

 

 

By Balance c/d

72,000

TOTAL

4,06,800

TOTAL

4,06,800

 

Dr.          CREDITORS A/c.          Cr.

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

To Cash/Bank

63,000

By Balance b/d

2,000

To Disc Received

3,600

By Credit Purchase

30,000

To Bills Receivable(Endorsed)

27,000

 

 

To Bills Payable

1,29,600

 

 

To Balance c/d

45,000

 

 

TOTAL

2,68,200

TOTAL

2,68,200

 

Dr.             BILLS RECEIVABLE A/c.         Cr.

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

To Balance b/d

36,000

By Cash

1,35,000

To Debtors (Bal Fig)

1,89,000

By Debtors (Dishonoured)

9,000

 

 

By Creditors (Endorsed)

27,000

 

 

By Balance c/d

54,000

TOTAL

2,25,000

TOTAL

2,25,000

 

Dr.          BILLS PAYABLE A/c.          Cr.

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

To Cash

1,08,000

By Balance b/d

72,000

To Creditors (Dishonored)

3,600

By Sundry Creditors (Bal Fig)

1,29,600

To Balance c/d

 

 

 

TOTAL

2,01,600

TOTAL

2,01,600

 

 

Q6) Following Information is given:

PARTICULARS

01.01.2012

31.12.2012

Sundry Creditors

9,800

8,100

Sundry Debtors

19,300

20,500

Furniture

1500

 

Stock

11,600

12,300

Plant & Machinery

30,000

 

 

Summary of Cash Book

 

Rs.

 

Rs.

To Balance b/d

5,000

By S. Creditors

31,000

To Receive From Debtors

78,000

By Wages

15,000

To Cash Sales

15,000

By Salaries

12,000

To Sales of Old Machinery

4,000

By Machinery

10,000

To Sales of Old Packing Boxes

600

By Investments

6,000

 

 

By Drawings

6,000

 

 

By General Exps.

17,000

 

 

By Balance c/d

5,600

 

1,02,600

 

1,02,600

 

Bad Debts written off during the year were Rs. 1500. Discount allowed were Rs. 2000 and received were Rs. 600. Depreciation on Machinery is to be 10% on the value of machinery on 31st December, 2011. Furniture is to be depreciated at 5%. Interest @6% is to be allowed on capital.

Prepare Trading Account, Profit and Loss Account for 2002 and Balance Sheet as at December 31,2012.

 

SOLUTION:

Dr.     TRADING A/c.          Cr.

PARTICULARS

AMOUNT

AMOUNT

PARTICULARS

AMOUNT

AMOUNT

To Opening Stock

 

11,600

By Sales

 

 

To Purchase

 

29,900

Credit

82,700

 

To Wages

 

15,000

Cash

15,000

97,700

 

 

 

 

 

 

To Gross Profit

 

53,500

By Closing Stock

 

12,300

 

 

 

 

 

 

TOTAL

 

1,10,000

TOTAL

 

1,10,000

 

Dr.    PROFIT AND LOSS A/c.            Cr.

PARTICULARS

AMOUNT

AMOUNT

PARTICULARS

AMOUNT

AMOUNT

To Salaries

 

12,000

By Gross Profit

 

53,500

To General Exps

 

17,000

By Sale of Old packaging boxes

 

600

To Bad Debts

 

1,500

By Disc Received

 

600

To Depreciation

 

 

 

 

 

On Furniture

(1500 x 5%)

75

 

 

 

 

On Machinery

(36000  x  10%)

3,600

3,675

 

 

 

To Disc Allowed

 

2,000

 

 

 

To Interest on Capital (57600x6%)

 

3,456

 

 

 

 

 

 

 

 

 

To NET PROFIT

 

15069

 

 

 

TOTAL

 

54,700

TOTAL

 

54,700

 

BALANCE SHEET AS ON 31/12/2012

LIABILITIES

AMOUNT

AMOUNT

ASSETS

AMOUNT

AMOUNT

Capital (Opening)

57,600

 

Furniture

1500

 

Add: Interest on Capital

3,456

 

Less: Depreciation

(75)

1,425

Add: - NET PROFIT

15,069

 

Plant & Machinery

30,000

 

Less: - Drawing

(6,000)

70125

Additions

10,000

 

 

 

 

 

40,000

 

Bills Payable

 

 

Less:  Sales

4,000

 

Creditors

 

8,100

 

36,000

 

 

 

 

Less: Depn @ 10%

(3,600)

32,400

 

 

 

Investments

 

6,000

 

 

 

Sundry Debtors

 

20,500

 

 

 

Closing Stock

 

12,300

 

 

 

Cash/Bank

 

5,600

TOTAL

 

78,225

TOTAL

 

78,225

 

WORKING NOTE: -

BALANCE SHEET AS ON 01/01/2012

LIABILITIES

AMOUNT

AMOUNT

ASSETS

AMOUNT

AMOUNT

Capital (Bal Fig)

 

57,600

Furniture

 

1,500

 

 

 

Plant & Machinery

 

30,000

 

 

 

Bills Receivable

 

 

 

 

 

Sundry Debtors

 

19,300

 

 

 

Closing Stock

 

11,600

 

 

 

Cash/Bank

 

5,000

Sundry Creditors

 

9,800

 

 

 

 

 

 

 

 

 

TOTAL

 

67,400

TOTAL

 

67,400

 

Dr.             DEBTORS A/c.     Cr.

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

To Balance b/d

19,300

By Cash & Cheque Received

78,000

To Credit sales (Bal Fig)

82,700

By Disc Allowed

2,000

 

 

By Bad Debts

1,500

 

 

 

 

 

 

By Balance c/d

20,500

TOTAL

1,02,000

TOTAL

1,02,000

 

Dr.          CREDITORS A/c.          Cr.

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

To Cash/Bank

31,000

By Balance b/d

9,800

To Disc Received

600

By Credit Purchase (Bal Fig)

29,900

To Balance c/d

8,100

 

 

TOTAL

39,700

 

TOTAL

39,700

 

 

Q7) A and B share profits and losses in the ratio of 3:2. Prepare Trading A/c: Profit and Loss A/c and Balance Sheet from the following:

 

Cash Book: Bank Balance on 1st Jan.. 2001 Rs. 8000: A's drawing 9000: B's drawing Rs. 6000 paid to trade creditors. Rs. 60,000. paid against B/P Rs. 16,000: Wages Rs. 22,000: Salaries Rs. 10,000; Other trade expenses, Rs. 26,510; Received from trade debtors. Rs. 91,200; Received against B/P 16,090; Receipts from cash sales 31,620: cash in hand. Rs. 400. (On 31st December, 2002). There was no cash in hand on 1st Jan., 2002.

 

Particulars of Assets & Liabilities:

PARTICULARS

01.01.2001

31.12.2001

A/s Capital

80,000

?

B's Capital

20,000

?

Stock

39,600

50,000

Creditors

50,000

38,710

Debtors

44,000

14,000

B/R

10,000

14,000

B/P

6,000

NIL

Premises

40,000

40,000

Furniture

2,400

2,400

 

Other Information: A and B will pay interest on drawing as Rs. 120 and Rs. 60. A and B are entitled to 5% interest on capital. B will get 6% Commission on the net profits remaining after such commission.

 

Allow 5% depreciation on premises and furniture and create a reserve for bad debts amounting Rs. 2650.

 

SOLUTION:

Dr.     TRADING A/c.          Cr.

PARTICULARS

AMOUNT

AMOUNT

PARTICULARS

AMOUNT

AMOUNT

To Opening Stock

 

39,600

By Sales

 

 

To Purchase

 

40,000

Credit

1,00,000

 

To Wages

 

22,000

Cash

31,620

1,31,620

 

 

 

 

 

 

To Gross Profit

 

80,020

By Closing Stock

 

50,000

 

 

 

 

 

 

TOTAL

 

1,81,620

TOTAL

 

1,81,620

 

Dr.    PROFIT AND LOSS A/c.            Cr.

PARTICULARS

AMOUNT

AMOUNT

PARTICULARS

AMOUNT

AMOUNT

To Salaries

 

10,000

By Gross Profit

 

80,020

To Trade Exps

 

26,510

By Sale of Old packaging boxes

 

 

To R.D.D

 

2,650

By Disc Received

 

 

To Depreciation

 

 

 

 

 

On Furniture

120

 

By Interest on Drawings

 

 

On Premises

2,000

2,120

A

120

 

To Interest on Capital

 

 

B

60

180

A

4,000

 

 

 

 

B

1,000

5,000

 

 

 

To B’s Commission

 

 

 

 

 

33,920 x 6/106

 

1,920

 

 

 

 

 

 

 

 

 

To NET PROFIT

 

 

 

 

 

A

19,200

 

 

 

 

B

12,800

32,000

 

 

 

 

 

 

 

 

 

TOTAL

 

80,200

TOTAL

 

80,200

 

BALANCE SHEET AS ON 31/12/2012

LIABILITIES

AMOUNT

AMOUNT

ASSETS

AMOUNT

AMOUNT

A

 

 

Furniture

2,400

 

Capital (Opening)

80,000

 

Less: Depreciation

120

2,280

Add: Interest on Capital

4,000

 

Premises

24000

 

Add: - NET PROFIT

19,200

 

Less: Depreciation

2000

38,000

 

1,03,200

 

Sundry Debtors

38,710

 

Less: - Drawing

9,000

 

Less: R.D.D

2,650

36,060

Less: Interest on Drawings

120

94,080

 

 

 

 

 

 

Bills Receivable

 

14,000

B

 

 

Closing Stock

 

50,000

Capital (Opening)

20,000

 

Cash/Bank

 

400

Add: Interest on Capital

1,000

 

 

 

 

Add: Commission

1,920

 

 

 

 

Add: - NET PROFIT

12,800

 

 

 

 

 

35,720

 

 

 

 

Less: - Drawing

6,000

 

 

 

 

Less: Interest on Drawings

60

29,660

 

 

 

 

 

 

 

 

 

Bank Overdraft

 

3,000

 

 

 

Creditors

 

14,000

 

 

 

 

 

 

 

 

 

TOTAL

 

1,40,740

TOTAL

 

1,40,740

 

WORKING NOTE: -

Dr     CASH/BANK A/C     Cr

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

To Balance

8,000

By A/s Drawings

9,000

To Debtors

91,200

By B/s Drawings

6,000

To B/R

16,090

By Trade Crs.

60,000

To Cash sales

31,620

By B/P

16,000

To Bank Overdraft

3,000

By Wages

22,000

 

 

By Salaries

1,000

 

 

By Trade Exp.

26,510

 

 

By Balance c/d

400

TOTAL

1,49,910

TOTAL

1,49,910

 

Dr.             DEBTORS A/c.     Cr.

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

To Balance b/d

50,000

By Cash & Cheque Received

91,200

To Credit sales (Bal Fig)

1,00,000

By Bills Receivable

20,090

 

 

By Balance c/d

38,710

TOTAL

1,50,000

TOTAL

1,50,000

 

Dr.             BILLS RECEIVABLE A/c.    Cr.

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

To Balance b/d

10,000

By Cash

16,090

To S. Debtors (Bal Fig)

20,090

By Balance c/d

14,000

TOTAL

30,090

TOTAL

30,090

 

Dr.          CREDITORS A/c.          Cr.

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

To Cash/Bank

60,000

By Balance b/d

44,000

To Bills Payable

10,000

By Purchases

40,000

To Balance c/d

14,000

 

 

TOTAL

84,000

TOTAL

84,000

 

Dr.             BILLS PAYABLE A/c.    Cr.

PARTICULARS

AMOUNT

PARTICULARS

AMOUNT

To Cash

16,000

By Balance B/d

6,000

 

 

By S. Creditors (Bal fig)

10,000

TOTAL

16,000

TOTAL

16,000

 

 

References:

  1. Accounting Notes of Delhi University/Mumbai University.
  2. Accountingnotes.com
  3. Accounting Article Library.

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