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:
- 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
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:
- Since there is no trail balance, there is no proof of accuracy.
- Profit or losses cannot be ascertained properly because of lack of information about purchases, sales, expenses, etc.
- 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.
- The Balance Sheet (called Statement of Affairs here) can be prepared only with difficulty and that loo without sufficient accuracy.
- Useful comparison for the guidance of management cannot be made because relevant information will generally be missing.
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:
- This system is followed by a sole proprietorship or partnership company. Companies cannot follow this system.
- The system maintains only one cashbook that confuses both private and business transactions.
- Normally, only personal accounts are recorded. That is, the real and nominal accounts are ignored.
- Capital is really assets minus liabilities. Under the Single-Entry System also, capital is ascertained in this manner.
- Profit or losses cannot be ascertained properly because of lack of information about purchases, sales, expenses.
- 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:
- Take the statement of affairs at the end of previous year. Open all accounts (except those already opened) with proper balances.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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:
- This Method is to be used when the summary 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.
- 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
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:
- Accounting Notes of Delhi University/Mumbai University.
- Accountingnotes.com
- Accounting Article Library.