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UNIT III
SINGLE ENTRY SYSYTEM
OR
ACCOUNTS FROM INCOMPLETE RECORDS
Meaning :
There is no system of account s called ‘single Entry System ‘. The term single entry is
vaguely used to refer to any method of maintaining accounts which does not conform to strict
principles of double entry.
Single entry does not mean that there is only entry for each transaction, In fact, single entry
is a combination of (a) Double entry for some transactions like cash collected from debtors .(b)
single entry for transactions like cash sales and (c) No entry for transactions like depreciation.
Definition:
Accounting to R.N. Carter, “Single entry cannot be termed as a system, as it is not based on
any scientific system, like double entry system. For this purpose. single entry is now-a-days known
as preparation of accounts form incomplete records”.
Salient Features or Characteristics of Single Entry:
(i) Absence of Uniformity :
It is not a specific system governed by definite files of operation. It is highly flexible
according to the capabilities of individuals maintaining the records.
(ii) Records Maintained :
Usually personal account are fully written and cash book is also maintained. Normal
accounts and most of the real accounts be completely omitted.
(iii) Mixing of Transactions:
Business dealings as well as personal transactions are mixed while writing the cash
book.
(iv) Suitability :
Sole traders, partnership firms and professionals who cannot afford a paid book
keeper usually follow this method to write their own accounts. Joint stock companies
have to follow double entry system under the provisions of the companies Act.
(v) Dependence on Original Vouchers:
No entries are made for a large number of transactions. For example, credit
purchases and sales have to be ascertained from the copies to invoices.
(vi) Finalization of Accounts:
Regular final accounts cannot be prepared. Profit or loss can be ascertained in a
crude way, which is not reliable.
2
Disadvantages or limitations of singles Entry System:
The following are the defects and limitations of single entry methods:
(i) insufficient Records: Except personal accounts and cash account. all other impersonal
accounts are left out. So, the accounts serve very little purpose.
(ii) absence of Trial Balance : trail Balance cannot be prepared for any period. Hence
arithmetical accuracy of the account cannot be verified.
(iii) difficulty in ascertaining profit; absence of record for expenses and incomes makes it
impossible to ascertain profit in a reliable way.
(iv) difficulty in ascertaining financial position: In the absence of real accounts, balance
sheet cannot be prepared to assess the financial position of the business.
(v) lack of statislical Data: statistical data relating to increase or decreae in sales, purchases,
different items of expenses, profits ect., cannot obtained.
(vi) Encouragement to Fraud: Fraud, embezzlement etc., by employees cannot be detected.
(vii) Reectiffication of errors is difficult: There is no cross verification system like Trial
Balance to detect mistakes. so rectification of errors is rare.
(viii) Value of the business cannot be ascertained: It is difficult for the owers to assess future
operations and growth, etc., of the business in the absence of reliable information.
(ix) planning and decision making are difficult: the owners cannot plan for future operations
and growth, etc., of the business in the absence of reliable information.
(x) difficulty in getting institutional loans: commercial banks do not accept incomplete
records as basis for extending credit.
(xi) filling tax returns, preparing claims etc: Tax authorities may charge tax arbitrarily in the
absence of reliable records. filling claims for loss of stock becomes difficult.
Sl
No.
Basis of
difference
Double entry system Single entry system
1.
2.
3.
4.
Recording of
transactions
Opening of
Accounts;
Preparation of
Trial Balance
Ascertaining
Profit or loss
Both aspect of all transaction are
recorded.
All personal, real and nominal
accounts are opened.
Trial Balance can be prepared.
Accurate profit or loss can be
found, through trading and profit
and loss A/c.
In some cases, both aspects,
in some others a single aspect
or no aspect is recorded.
Only personal are opened.
Trial Balance can not be
prepared.
Profit or loss cannot be found
normally, in the absence of
Trading and profit and loss
A/c.
3
5.
6.
7.
8.
Revealing
Financial
Position
Accepatability
Utility
Internal check
Reliable financial position can
be found through Balance Sheet.
Accepatable for Income tax, and
other tax purpose, for raising of
bank loans etc.
Suitable for any type of business
of any size.
Internal check is possible.
Balance sheet cannot be
prepared. so, financial
position is difficult to
ascertain.
Not acepatable for taxation,
claims, raising of loans. ect.
It can be followed by small
business men who can
exercise personal control
over the business.
Internal check is not possible.
Ascertainment of profit
When business records are incomplete, profit or loss can be found through any one of the
following two methods.
(1) networth Method (statement of affairs methods)
(2) conversion methods.
New worth Method
This is also called statement of Affairs methods because ‘Net worth’ is ascertained with the help
of statement of affairs.
(i) net worth is the owners share of the assets, after providing for outside liabilities.
(ii) Different between net worth at the beginning of the year and at the end of the year
represents profit or loss year because owners’ worth or share in assets increases or
decreases due to profit or loss respectively.
(iii) Before ascertaining the chare in net worth which is the profit or loss. adjustment must be
made for any drawings by the owner or additional capital contributed by him.
The following five steps are to be followed for ascertaining profit or loss under not worth
method.
4
Step (i): Calculating Opening Capital
Opening capital can be found by preparing a statement of affairs at the beginning of the
year. A statement of affairs is just like a balance sheet. Assets are shown on the right hand side and
liabilities are shown on the left hand side of the statement of affairs. The difference between both
the sides represses ‘opening capital’.
Since full record are not maintained by the business, the assets and liabilities are ascertained
as follows:
(a) Cash can be physically counted.
(b) Bank balance is obtained from the pas book.
(c) Stock is recorded though physical stock taking.
(d) Debtors and creditors are usually from the list maintained by the business.
(e) Other assets can be listed out after an approximate valuation by the owners.
(f) Any other relevant data like outstanding expenses, accrued income should be listed out from
the owners memory.
Step (ii) : Ascertainment of Drawings during the year
This is a difficult task in most of the cases becauses cash book may show a part of the
withdrawals only. Money may be used for personal purpose out of sale proceeds and the balance
only may be recorded in cash book or deposited in the bank. Still, the owners personal estimate
may help help in arriving at the rough amount of the drawings.
Step (iii): Ascertaining Capital introduced during the year:
Additional capital provided by the owner during the may be in cash or in the form of assets
or goods. The total amount must be recorded, in whatever form it was brought in.
Stop (iv): computing closing capital
Closing capital can be found by preparing a statement of affairs at the end of the year, in the
same way as opening statement was prepared. However, all adjustments relating to depreciation,
provision for doubtful debts etc., must be mead in the closing statement of affairs which were not
necessary in the opening statement.
Step (v): Preparing Statement of Profit
Statemetn of profit is prepared as follows:
Statement of profit or Loss for the year………
Closing capital
Add: Drawings
Less: additional cpital introduced xxxxx
Less: Opeing capital xxxxx
Net profit/loss for the year
Xxxxx
xxxxx
xxxxx
xxxxx
xxxxx
5
Distinction between Balance Sheet and Statement of Affairs
Though both of them show asset and liabilities, they differ in the following respects:
(1) Basis of preparation: balance sheet is based on leder balance but statemetn of affairs is
prepared from balance, valuations, information form inquity, etc.,,
(2) System : Balance Sheet is prepared on the basis of double entry system but statement of
affairs is out of incomplete records.
(3) Trial Balance: Trial balance is prepared before a balance sheet is draw which ensures its
arithmetic accuracy. Statement of affairs has no foundation like trial balance.
(4) Omission of assets and liabilities : omission of any assets or liabilities is automatically
found in balance sheet because the debit and creditors will no tally.
(5) Objective and Puurpose : balnce sheet reveals the financial position of a business
accurately.
(6) Capital : capital is show in the balance sheet from the capital account in the ledger.
2.conversion method:
Meaning:
The process of collecting, computing and recording mission information along with the
available data in the incomplete books of a business is called ‘conversion method’ once the
books aer ‘converted’, all future transctions can be recorded as per’ double enty system’.
Need for conversion ;
The net worth method does not provided a clear picture of the operating results of a
business. It does not show sales, purchases , gross profit, operating expenses etc. so it not
possible to make a meaningful analysis of the financial statement and initiate effective steps to
improve the financial position of the business.
Conversion to double entry system enables a business to avoid the harassment of taxation
authorities and ensurs better management of the business.
The following are the steps to be followed for conversion of incomplete records as per the
requirements of double entry system.
Step : 1 :
statement of affairs at the beginning of the year from which conversion is to be effected should
be pepared. The balalnce in the statement represents opening capital.
In problems, it may not be possible to complete the statement due to missing opening balance
like Debtors, creditors, stock. The statement should be prepared to the extent possible and can be
completed at a later stage.
6
Step 2;
Cash book with cash and bank columns or a single column should be prepared. Careful
scrutiny of bank pass book and enquiry relating to cash ‘takings’ used by the owner for personal
expenses and payments are essential.
In problems, opening or closing cash or bank balance may be missing. The blance in the cash
book represents the missing figure. Cash book must be prepared even when the opening and
closing balance of cash and bank are given. Any shortage on the debit side can be cash sales or
additional capital introduced or sundry income. Shortage on the credit side can be cash purchases
or drawings or sundry expenses.
Step 3 :
Bills receivables accounts, bills payables account, total debtors account and total creditors
account must be prepared. Preparation of these accounts can help in finding any missing items like
opening or closing debtors, opening or closing creditors, credit purchases and sales ect.
Total sales and total purchases can be found by adding cash and credit sales and also cash and
credit purchases.
If opening or closing stock is missing, preparation of memorandum trading account after
ascertaining gross profit ratio can reveal the opening or closing stock whichever is not given.
Step 4:
The opening statement of affairs can now be completed, by filling up any missing figure and
opening capital can be ascertained.
Step 5 :
Appropriate journal entry should be passed in respect of assets and liabilities included in the
opening statement affairs.
Step 6:
Real and nominal accounts must be written from the information recorded in the cash book,
total debtors account, total creditors accounts. Etc. the double effect of every entry must be posted
to the ledger, opening new accounts wherever necessary.
Step 7:
All the accounts in the ledger must be balanced now and a trial balance should be extracted.
Step8:
From the trial balance and other additional details, trading account, profit and loss account
and balance sheet must be prepared.
The following table shows the figures which are usually missing in problems and the
appropriate account from which they can be found.
s.no Missing items Appropriate account to find the
items
1.
2.
Credit sales
Opening debtors
Total debtors account reveals any
7
3.
4.
5.
6.
7.
8.
9.
10
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
Closing debtors
Cash collected from debtors
Credit sales
Opening debtors
Closing debtors
Cash collected from debtors
Opening stock
Closing stock
Opening bills receivable
Closing bills
Bills receivable received
Bills receivable collected
Opening bills payable
Closing bills payable
Bills payable issued
Bills payable honoured
Opening cash or bank
Closing cash or bank
Cash sales
Cash purchases
Cash received from debtors
Cash paid to creditors
Drawings
Sundry expenses
Additional capital
Sundry income
one of the items a balancing figure.
Total debtors account reveals any
one of the items a balancing figure
Memorandum trading account
reveals any one them, if gross profit
ratio is known
Bills receivable account can reveal
any one of the items as balancing
figure.
Bills receivable account can reveal
any one of the items as balancing
figure
Cash and bank A/c can reveal any
one of the missing items as
balancing figure.
Note: when opening or closing cash balance and also cash purchases or cash sales are missing,
it can be assured that there are no cash sales or ash purchases unless some other way is available
to find them.
Various required items for the preparation of final accounts should be located from the
information given in the problem. In this process missing figures can be identified. The
following table is useful in searching for the required information.
8
Final Accounts Item Where to find out
(ii) Expenses relating to debtors
such as bad debts. Discount
allowed etc.
Total debtors account
and/or other information
(iv) Depreciation Comparsion of opening
& closing value of assets
or Rate of depreciation
given in the adjustments.
4. profit & Loss
Account (credit
side)
(i)Gross profit
(ii) Income received
(iii) income receivable
Form Trading A/c
Receipts side of cash
book
From Adjustments
5.balance
sheet(liabilities)
Bank overdraft Cash book
Sundry creditors & bills payable By preparing creditors
A/c and bills payable
A/c or from closing
balances given or other
information.
Calculation of missing figures by preparing necessary ledger A/c.
Rs. Rs
To balance b/d (opening balance)
To bills receivable (dishonoured)
To freight (charged)
To interest on overdue A/c
To Cash
To credit sales if given
xxx
xxx
xxx
xxx
xxx
xxx
xxx
By cash received
By bank
By bills receivable
By discounts
By return inwards
By bad debts
By transfer to creditors
By balance c/d
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
(ii)finding out credit purchases or closing creditors: A total creditors account is to be prepared to
find out either missing credit purchases or closing balance of creditors in the following manner:
9
Proforma of a total creditors A/c
Rs Rs
To cash paid
To bank
To bill payable
To returns outwards
To discounts received
To allowances & rebates
To transfer from debtors
To balance c/d
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
By balance b/d
By cash
By bills payable
By credit purchases
xxx
xxx
xxx
xxx
xxx
(iii) finding out bills receivable: A bills receivable a/c is to be prepared to ascertain either missing
opening or closing balance of bills receivable.
Proforma of a bills receivable A/c
Rs Rs
To balance b/d
To sundry debtors
xxx
xxx
xxx
By cash
By sundry debtors
By balance c/d
xxx
xxx
xxx
xxx
(iv)finding out bills payable ;
A bills payable A/c is to prepared to ascertain either missing opening or closing balance of
bills payable in the following manner:
Proforma of a bills payable A/c
Rs Rs
To cash
To sundry creditors
To balance c/d
xxx
xxx
xxx
xxx
By balance b/d
By sundry creditors
xxx
xxx
xxx
(v) Finding out opening capital: An opening statement of affairs should be prepared to
ascertain opening balance of capital without which closing balance sheet cannot be
prepaid.
10
(vi) Finding out cash and bank balance: a cash book should be prepare to ascertain either or
closing balance of cash and bank. The cash book should be prepared and scrutinized
thoroughly even if the opening and closing balane ar given in order to find out missing
figures.
Net worth (or) statement of affairs method
Illustrations 1
Find out profit from the following data
Capital at the beginning of the year
Drawing during the year
Capital at the end of the year
Capital introduced during the year
Rs.
8,00,000
1,80,000
9,00,000
50,000
Solution :
Statement of Profit
Closing capital
Add: drawings
Less: Additional capital
Less : Opening capital
Net profit
Rs.
9,00,000
1,80,000
10,80,000
50,000
10,30,000
8,00,000
2,30,000
Illustrations 2
Mohan, a retail merchant commenced business with a capital of Rs. 12,000 on 1.1.94. subsequently
on 1.5.94 he invested further capital of Rs. 5,000. During the year, he has withdrawn Rs. 2,000 for
his personal use. On 31.12.94, his assets and liabilities were as follows:
Cash at Bank
Debtors
Stock
Furniture
Creditors
Rs.
3,000
4,000
16,000
2,000
5,000
Calculate the profit (or) loss made during the year 1994.
Solution:
11
Calculation of closing capital
Statement of affairs of Mohan as on 31.12.94
Liabilities Rs. Assets Rs,
Creditors
Capital (bal. fig)
5,000
20,000
25,0000
Cash at bank
Debtors
Stock
Furniture
3,000
4,000
16,000
2,000
25,0000
Statement of profit (or) Loss for the year ended 31.12.94
Closing capital
Add: drawings
Less: Additional capital
Less : Opening capital
profit
Rs.
20,000
2,000
22,000
5,000
17,000
12,000
5,000
Illustrations 3
Mr. Mano keeps his books of accounts under single entry system. His financial position on 31.12.91
was as follow:
1990
Rs.
1991
Rs.
Cash
Stock in trade
Plant & Machinery
Bills Receivable
Sundry Debtors
Sundry creditors
Furniture
Drawings
9,860
38,520
54,420
-
24,840
72,040
4,960
-
800
57,020
61,000
16,480
43,940
80,000
5,220
5,000
During the year he introduction additional capital of Rs. 20,000
From the above particular prepare a statement of profit and Loss of Mr.Mano for the year
ended 31.12.91.
12
Solution:
Statement of affairs of Mano as on 31.12.90
Liabilities Amount
Rs.
Assets Amount
Rs.
Sundry creditors
Capital (bal.fig)
72,040
60,560
1,32,600
Cash
Stock in trade
Plant & Machinery
Sundry Debtors
Furniture
9,860
38,520
54,420
24,840
4,960
1,32,600
Statement of affairs of Mano as on 31.12.90
Liabilities Amount
Rs.
Assets Amount
Rs.
Sundry creditors
Capital (bal.fig)
80,000
1,04,460
1,84,460
Cash
Stock in trade
Plant & Machinery
Bills Receivable
Sundry Debtors
Furniture
800
57,020
61,000
43,940
5,220
16,480
1,84,460
Statement of Profit/loss for the year ended 31.12.91
Closing capital
Add: drawings
Less: Additional capital
Less : Opening capital
Profit made during the year
Rs.
1,04,460
5,000
1,09,460
20,000
89,460
60,560
28,900
Illustrations 4
Ramesh keeps his books on single entry basis. Prepare a statement of affairs as on
31.10.1982 and a statement of profit (or) Loss for the period ending 31.10.1982.
13
Assets & Liabilities
Bank Balance
Cash on hand
Debtors
Stock
Plant
Furniture
1.11.81
Rs.
560(cr)
10
4,500
2,700
4,000
1,000
31.10.82
Rs.
350(dr)
50
3,600
2,900
4,000
1,000
Ramesh had withdrawn Rs. 2,000 during the year and had introduced fresh capital of Rs.4.200 on
1.7.1982. a provision of 5% in detors is necessary. Write off depreciation in plant at 10% and
furniture at 15%. Interest on capital is to be allowed at 5%
Calculation of opening capital
Statement of affairs of Remesh as on 1.11.81
Liabilities Amount
Rs.
Assets Amount
Rs.
Bank old
Capital (bal.fig)
560
11,650
12,210
Cash on hand
Debtors
Stock
Plant
Furniture
10
4,500
2,700
4,000
1,000
12,210
Calculation of closing capital
Statement of affairs of Remesh as on 31.10.82
Liabilities Amount
Rs.
Assets Amount
Rs.
Capital (bal.fig) 11,170
11,170
Bank bal. (dr.)
Cash on hand
Debtors 3,600
Less: 5% provision 180
_____
Stock
Plant 4,000
Less: 10% depreciation400
____
Furniture 1,000
Less: 15% depreciation 150
_____
350
50
3,420
2,900
3,600
850
11,170
14
Statement showing Profit/loss for the period ended 31.10.82
Closing capital
Add:Drawings
Less: Additional capital
Less: Opening capital 11,650.00
(+) interest on capital (11,650 * 5%)582.50
4,200 * 5/100*4/12 70.00
______
Less
Rs.
11,170
2,000
13,170
4,200
8,97,000
12,232.50
3,262.50
Illustration 5
Mr. X has maintatained his bboks byn single entry method. From the following details
calculate profit for the year and a statement of affairs at the of the year.
Rs.1,000 (cost) furniture was sold for rs. 5,000 on 1.1.88. 10% depreciation is to be charged on
furniture. Mr. X has draw Rs.1,000 p.m rs.2,000 was invested by Mr.X in 1998 as further capital.
Stock
Debtors
Cash
bank
creditors
outstanding expenses
furniture
1.1.88
Rs.
40,000
30,000
2,000
10,000
15,000
5,000
3,000
31.12.88
Rs.
60,000
40,000
1,000
5,000
25,000
8,000
2,000
Bank balance on 1.188 is as per cash book the bank. Overfraft on 31.12.88 is as per bank statement.
Rs.2,000 chques drawn in Dec. 1988 have not been encashed within the year.
15
Solution;
Calculation of capital at the beginning
Statement of affairs as on 1.1.88
Liabilities Rs. Assets Rs.
creditors
outstanding expenses
capital (bal.fig)
15,000
5,000
65,000
85,0000
Cash
bank
Debtors
Stock
furniture
2,000
10,000
30,000
40,000
3,000
85,0000
Calculation of capital at the end
Statement of affairs as on 31.12.88
Liabilities Rs. Assets Rs.
creditors
outstanding expenses
bank overdraft
[5,000+2,000]
Capital (bal. fig)
25,000
8,000
7,000
62,800
1,02,800
Cash
bank
Debtors
Stock
Furniture1.1.88 3,000
Less : sold on 1.1.88
At book value 1,000
_____
2,000
Less: 10% depreci 200
_______
1,000
40,000
60,000
1,800
1,02,800
Statement of Profit for the year ended 31.12.88
Capital on 31.12.88
Add: Drawing (1,000* 12)
Less: additional Capital 2,000
Less: profit on sale of furniture4,000
___
Less: Capital on 1-1-88
Trading profit
Add : profit on sale of furniture
Total net prof
Rs.
62,800
12,000
74,800
6,000
68,800
65,000
3,800
4,000
7,800
16
Illustration 6
From the following information ascertain
Opening stock (i.e on 1-1-96)
Purchases mae during 1996
Sales made during 1996
Stock on 31-12-1996
Wages
Rate of gross profit on cost
Rs.
2,50,000
3,25,000
60,000
3,000
25%
Solution:
Memorandum Trading A/C for the year ending 31-12-96
To opening stock(bal.fig)
To purchases
To wages
To gross profit
{3,25,000 *25/125}
Rs.
67,000
2,50,000
3,000
3,85,000
By sales
By closing stock
Rs.
3,25,000
60,000
3,85,000
Stock 1-1-96 - Rs.67,000
Illustration 7
From the following data, ascertain sales made during the year by preparing Memorandum
Trading Account.
Stock 1-1-95
Stock on 31-12-95
Purchases during 1995
Rate of gross profit on sale:
Wage paid
Rs.
60,000
40,000
4,00,000
20%
10,000
17
Solution
Memorandum Trading A/C for the year ending 31-12-95
To opening stock(bal.fig)
To purchases
To wages
To gross profit
{4,30,000*20/80}
Rs.
60,000
4,00,000
10,000
1,07,500
5,77,500
By sales
By closing stock
Rs.
5,37,500
40,000
5,77,500
Working Note:
[cost of good sold = opening stock + purchases + wages –closing stock]
= 60,000+4,00,000+10,000-40,000 = 4,30,000
Illustration 8
From the following details, find out the net credit sales for the year;
Opening balance of sundry debtors (dr)
Cheque collection during the year
Cash collection during the year
B/R received during the year
Closing balance of sundry debetors (Dr.)
Bad debts written off
Discount allowed
Goods returned by customers
Cheque dishonoured
Rs.
20,000
1,80,000
25,000
5,000
24,000
2,500
1,000
2,500
500
Solution;
Total Debtors A/c
To balance b/d
To Bank
To sales –credit (bal.fig)
Rs.
20,000
500
21,19,500
2,40,000
By bank
By cash
By B/R
By bad debts
By Discount allowed
By sales return
By balancec/d
Rs.
1,80,000
25,000
5,000
2,500
1,000
2,500
24,000
2,40,000
18
Illustration 9
From the following particulars find out net credit purchases:
Opening balance of sundry creditiors
Payment by cheques
Payment by bill payable
Payment in cash
Discount received
Purchases returns
Closing balance of sundry creditors
Rs.
40,000
2,35,000
25,000
5,000
2,500
5,000
47,500
Total creditors A/c
To Bank
To B/P
To Cash
To Discount received
To Purchases returns
To Balance c/d
Rs.
2,35,000
25,000
5,000
2,500
5,000
47,500
3,20,000
By balance b/d
By purchases – credit
(bal.fig)
Rs.
40,000
2,80,000
3,20,000
Illustration 10
Find out purchases and sales from the following details by making necessary accounts:
Opening balance of sundry debtors
Opening balance of sundry creditors
Collections from debtors
Discount received
Bad debts
Payment to creditors
Discount allowed
Returns inwards
Returns outwards
Cash purchases
Cash sales
Closing balance of debtors
Closing balance of crditors
Rs.
30,000
10,000
1,60,000
2,500
1,000
14,000
1,500
2,000
3,000
6,000
10,000
35,000
15,000
19
Solution:
(i) Calculation of credit sales
Total debtors A/c
To balance b/d
To sales –credit (bal.fig)
Rs.
30,000
1,69,500
1,99,500
By cash
By bad debts
By discount allowed
By Return inwards
By balance c/d
Rs.
1,60,000
1,000
1,500
2,000
35,000
1,99,500
(ii) Calculation of credit purchases
Total creditors A/C
To cash
To discount received
To return outwards
To balance c/d
Rs.
14,000
2,500
3,000
15,000
34,500
By balance b/d
By purchases – credit
(bal.fig)
Rs.
10,000
24,500
34,500
Total purchases:
Cash
Credit
Total sales
Cash
Credit
6,000
24,500
10,000
1,69,500
30,500
1,79,500
Illustration 11
From the following details find out the credit purchases and total purchases:
Cash purchases
Bill payable(opening)
Bill payable (closing)
creditors(opening)
creditors(closing)
cash paid to creditors
Rs.
29,000
7,500
2,500
20,000
18,000
25,000
Bills payable paid during the
year
Purchases returns
Allowances from creditors
Bills payable dishonoured
Rs.
10,500
1,500
800
300
20
Solution:
To creditors A/c (B/P
dishonoured)
To cash
To Balance c/d
Rs.
300
10,500
2,500
13,300
By Balance b/d
By Sundry Creditors
(aacceptance given
()bal.fig during the year)
(transfer)
Rs.
7,500
5,800
13,300
Total creditors A/c
To cash
To Purchases returns
To Allowances
To Bills payable
To Balance c/d
Rs.
25,000
1,500
800
5,800
18,000
51,100
By Balance b/d
By B/P A/c
(dishonoured)
By purchases
(credit)(bal.fig)
Rs.
20,000
300
30,800
51,100
Credit purchases Rs. 30,800
Total Purchases = credit purchases + cash purchases
= 30,800 + 29,000 = Rs.59,800
Illustration 12
From the following information, you are required to calculated total sales:
Bills Receivable in the
beginning
Debtors in the beginning
Bills Receivable
Encashed during the year
Cash received from Debtors
Rs.
7,800
30,800
20,900
70,000
Bad debts written off
Returns inwards
Bill Receivable at the end
Debtors at the end
Cash sales (as per cash book)
Bills Receivable dishonoured
Rs.
2,800
8,700
6,000
25,500
40,900
1,800
21
Solution:
Bills Receivable A/c
To Balance b/d
To sundry Debtors A/c
(B/R received during the
year) (bal.fig)
Rs.
7,800
20,900
28,700
By cash
By Debtors A/c (B/R
Dishonured)
By Balance c/d
Rs.
20,900
1,800
6,000
28,700
Total Debtors A/c
To balance b/d
To B/R (dishonoured)
To sales (credit) (bal.fig)
Rs.
30,800
1,800
95,300
1,27,900
By cash
By Bad debts
By Return Inwards
By bills Receivable
By balance c/d
Rs.
70,000
2,800
8,700
20,900
25,500
1,27,900
Total sales = cash sales + credit sales
= 40,900+95,300
= Rs. 1,36,200
Illustration 13
From the following data, determine bills receivable received from debtors and bills payable
paid on maturity during the period.
Opening balance :B/R
: B/R
Closing balance :B/R
;B/R
B/R dishonoured
B/R encashed
B/R discounted (discount Rs. 250)
B/R issued
Rs.
30,000
15,000
45,000
20,000
2,500
70,000
5,000
65,000
22
Solution:
Calculation of bills receivable received from debtors
Bills Receivable A/c
To Balance b/d
To sundry Debtors A/c
(B/R received) (bal.fig)
Rs.
30,000
92,500
1,22,500
By bank –dishonoured
By discount
By bank encashed
By debtors dishonoured
By balance c/d
Rs.
4,750
250
70,000
2,500
45,000
1,22,500
Calculation of Bills payable paid on maturity Bills payable A/c
To bank (bal.fig)
To Balance c/d
Rs.
60,000
20,000
80,000
By Balance b/d
By sundry creditors
Rs.
15,000
65,000
80,000
Illustration 14
Rama commenced business on 1.1.89 with a capital of Rs. 25,000. He immediately bought
furniture for Rs. 4,000. During the year, he borrowed Rs,5,000. from his wife and introduced a
further capital of Rs. 3,000. He has withdrawn Rs. 600 at the end of cash month for family
expenses. From the following particulars obtained from his books, you are required to prepare
Trading and P & L A/c and Balance sheet as on 31.12.89.
Sales (including cash sales of Rs. 30,000)
Purchases (including cash purchases of Rs.10,000)
Carriage
Wages
Discount allowed to debtors
Salaries
Bad debts written off
Trade expenses
Advertisement
1,00,000
75,000
700
300
800
6,200
1,500
1,200
2,200
Rama has used goods worth Rs. 1,300 for private purposes and paid Rs.500 to his son which
is not recorded anywhere. On 31.12.89, his debtors, were worth Rs. 21,000 creditors Rs. ,15,000
and stock intrade Rs. 10,000. Furniture to be depreciated at 10% p.a.
23
Solution:
Trading and P& L A/c Rama for the year ended 31.12.89
Rs. Rs. Rs. Rs.
To Purchases 75,000
Less: Drawings 1,300
________
To Carriage
To Wages
To gross profit c/d
To Depreciation on
Furniture[4,000 * 10%]
To Discount allowed
To Salaries
To Bad debts
To Trade expenses
To Advertisement
To net profit(transfer to
capital A/c)
73,700
700
300
35,300
1,10,000
800
6,200
1,500
1,200
2,200
23,000
35,300
By sales
By closing stock
1,00,000
10,000
1,10,000
35,300
Balance sheet of Rama as on 31.12.89
Liabilities Rs. Rs Assets Rs. Rs.
Capital
Add: additional
capital
Less: Drawings
[60012+500+1,300]
Net profit
Loan from wife
creditors
25,000
3,000
28,000
9,000
42,000
5,000
15,000
62,000
Furniture
Less: Depreciation
Debtors
Stock
Cash
4,000
400
3,600
21,000
10,000
27,400
62,000
24
Working notes:
Calculation of cash received from Debtors
Total Debtors A/c
To Balance b/d
To sales (credit)
(1,00,000-30,000)
Rs.
Nil
70,000
70,000
By cash (bal.fig)
By Discount allowed
By Bad debts written off
By balance c/d
Rs.
46,700
800
1,500
21,000
70,000
Calculation of cash paid to Creditors A/c
To cash (bal.fig)
To balance c/d
Rs.
50,000
15,000
65,000
By Balance b/d
By purchases (credit)
[75,000-10,000]
Rs.
Nil
65,000
65,000
Calculation of cash at the end
Cash book
To Capital
To Loan from wife
To additional capital
To sales
To debtors
Rs.
25,000
5,000
3,000
30,000
46,700
1,09,700
By creditors
By furniture
By Drawings
By purchases
By carriage
By wages
By salaries
By Trade Expenses
By Advertisement
By Balance c/d (bal.fig)
Rs.
50,000
4,000
7,700
10,000
700
300
6,200
1,200
2,200
27,400
1,09,700
25
Illustration 15
Arul keeps his books under single entry. He gives the following particular for the year 1983.
1.1.83
Rs.
31.12.83
Rs.
Stock
Bills receivable
Bills payable
Furniture
Machinery
Debtors
Creditors
18,470
5,500
6,200
2,100
15,500
13,200
10,070
22,500
3,800
4,300
-
-
16,000
13,200
Summary of the cash book
To balance b/d
Debtors
Interest from investment
Furniture
Bills receivable
Sales
Rs.
2,300
30,990
150
450
8,250
10,300
52,440
Creditors
Purchases
Wages
Salaries
Rent
Investment
Insurance
Advertisement
Carriage inwards
Bill payable
Drawings
Furniture
Balance c/d
Rs.
11,600
6,600
5,400
6,000
600
5,000
600
500
250
9,400
2,400
200
9,890
52,440
A reserve for double debts is to be provided at 5% on debtors. Furniture and Machinery are
to be depreciated at 10%. Salaries Rs. 500 and stationery expenses Rs.150 are yet to be paid.
The prepaid insurance was Rs.200. interest accrued on investments was Rs.75. furniture of the
book value of Rs.600 (1.1.83) was sold on September 30 and new furniture was purchased on
the same date.
26
Prepare the Trading and P &L A/c Balance sheet as on 31.12.83.
Rs. Rs.
To opening stock
To purchases : cash 6,600
Credit 22,230
_____
To wages
To Carriage inwards
To Gross profit c/d
To provision for double
debts
To rent
To insurance 600
Less : prepaid 200
________
To salaries 6,000
Add: outstanding 500
_____
To Advertisement
To Depreciation
on Machinery
on Furniture
To stationary expenses
To Loss on sales of
furniture[555-450]
To net profit (transferred
to capital A/c)
18,740
28,830
5,400
250
20,190
73,140
800
600
400
6,500
500
1,550
200
150
105
9,610
20,415
By sales
Cash 10,300
Credit 40,340
_______
By closing stock
By Gross profit c/d
By Interest from
investment 150
Add: Accrued
interest 75
___
50,6440
22,500
73,140
20,190
225
20,415
Balance sheet of arul as on 31.12.83
Liabilities Rs. Asset Rs.
Bill payable
Creditors
salaries outstanding
stationary expenses due
capital 40,800
(-)Drawings 2,400
______
38,400
4,300
13,200
500
150
48,010
Cash
Stock
Bills receivable
Debtors 16,000
Less: Provision 800
Investment
Prepaid insurance
Accrued Interest
3,890
22,500
3,800
15,200
5,000
200
75
27
Add :net profit9,610
66,160
Machinery 15,500
Less: Depreciation 1,550
_______
Furniture 2,100
Less: sold 600
_____
1500
Add: new furniture
purchased 200
____
1,700
Less; Depreciation 155
______
13,950
1,545
66,160
Working nots:
Calculation of credit sales
Total Debtors A/c
To balance b/d
To sales (credit)(bal.fig)
Rs.
13,200
40,340
53,540
By B/R
By Cash
By balance c/d
Rs.
6,550
30,990
16,000
53,540
Bills Receivable A/c
To balance b/d
To Debtors A/c (bal.fig)
Rs.
5,500
6,550
12,050
By cash
By balance c/d
Rs.
8,250
3,800
12,050
Bills payable A/c
To Cash
To balance b/d
Rs.
9,400
4,300
13,700
By balance c/d
By Creditors A/c
(transferred) (bal.fig)
Rs.
6,200
7,500
13,700
28
Total creditors A/c
To cash
To B/P
To balance c/d
Rs.
11,600
7,500
13,200
32,300
By balance b/d
By purchases
(credit)(bal.fig)
Rs.
10,070
22,230
32,300
Calculation of capital on 1.1.83
Statement of affairs as on 1.1.83
Liabilities Rs. Asset Rs.
B/P
Creditors
Capital (bal.fig)
6,200
10,070
40,800
57,070
Stock
B/R
Furniture
Machinery
Debtors
Cash
18,470
5,500
2,100
15,500
13,200
2,300
57,070
Furniture A/c
Rs. Rs.
1.1.83 to balance b/d
30.9.83 to cash
2,100
200
2,300
30.9.83 by cash (sales)
30.9.83 By Depreciation
[600*10/100*9/12]
30.9.83 by P&L A/c(loss)
31.12.83 by depreciation
[1,500*10/100+200*3/12*10/100]
31.12.83 by balance c/d
450
45
105
155
1,545
2,300
29
Illustration 16
The position of Manohar’s business as on 1st January 1996 was as under
Sundry creditors Rs.1,70,000: freehold premises Rs. 5,00,000: stock Rs.2,50,000: sundry debtors
Rs. 2,00,000: Furniture Rs.20,000
An abstract of the cash book is appended below:
Receipts Rs. Payments Rs.
Sundry debtors
Cash sales
1,50,000
8,00,000
9,50,000
Over drat(1-1-96)
Expenses
Drawings
Sundry creditors
Cash in hand
Cash at bank
1,00,000
5,00,000
30,000
2,00,000
20,000
1,00,000
9,50,000
The following additional information is available: closing stock Rs.3,00,000. Closing debtors
Rs.2,50,000; closing creditors Rs.1,20,000, no additions were made during the year to premises and
furniture but they are to be depreciated @ 10% and 15% respectively./ a bad debts provision of 2
1/2 % is to be raised.
Prepare a Trading and Profit and loss account for the year ended 31st December 1996 and a balance
sheet as on that date.
Solution:
Trading and Profit & Loss A/c of Manohar for the year ended 31-12-96
Rs Rs
To opening stock
To purchases
To Gross profit c/d
To Expenses
To Depreciation:
Premises
Furniture
To provision for bad debts
To Net profit transferred
to capital A/c
2,50,000
1,50,000
9,00,000
13,00,000
5,00,000
50,000
3,000
6,250
3,40,750
9,00,000
By sales
By closing stock
By Gross profit b/d
10,00,000
3,00,000
13,00,000
9,00,000
9,00,000
30
Balance sheet Manohar as on 31st Dec 1986
Liabilities Rs Asset Rs.
Sundry creditors
Capital 7,00,000
(+) Net profit 3,40,750
_______
10,40,750
(-) Drawings 30,000
_______
1,20,000
10,10,750
11,30,750
Cash in hand
Cash at bank
Stock
Debtors 2,50,000
(-)Provision 6,250
______
Freehold
Premises 5,00,000
(-) Depreciation 50,000
__________
Furniture 20,000
(-)Depreciation 3,000
________
20,000
1,00,000
3,00,000
2,43,750
4,50,000
17,000
11,30,750
Working notes;
(a) Calculation of missing figures:
Total creditors A/c
Rs Rs
To cash
To balance c/d
2,00,000
1,20,000
3,20,000
By balance b/d
By purchases – credit
(bal.fig)
1,70,000
1,50,000
3,20,000
(b) Calculation of credit sales
Rs Rs
To balance b/d
To sales –credit
(bal.fig)
2,00,000
2,00,000
4,00,000
By cash
By balance c/d
1,50,000
2,50,000
4,00,000
31
(c) Calculation of capital on 1-1-96
Statement of affairs as on 1-1-96
Liabilities Rs Asset Rs
Bank overdraft
Sundry creditors
Capital (bal,fig)
1,00,000
1,70,000
7,00,000
9,70,000
Freehold Premises
Closing stock
Debtors
Furniture
5,00,000
2,50,000
2,00,000
20,000
9,70,000
