e Ent ry
(Sin gl
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Sy
Ch:18 Accounts of Incomplete Record
(Single Entry System)
What is Single Entry System?
Single entry system refers to an accounting method that does not adhere to
the rules of double-entry accounting. Instead, it records transactions solely in
the cash (book) account and a limited number of personal accounts.
features:
Ideal for small businesses.
Lacks standardized recording methods.
Personal accounts are maintained.
Utilizes a cash book for recording transactions.
Advantages of Single Entry System:
1. Simplicity:
An easy method is suitable for small businesses.
Inexpensive compared to double-entry systems.
2. Accessibility:
No need for specialized accounting knowledge.
3. Calculation Convenience:
Straightforward for determining profit or loss.
Limitations of Single Entry System:
1. Lack of Asset Control:
1. Limited oversight on assets and liabilities.
2. Potential for Inaccuracies:
1. Greater likelihood of incorrect profit or loss calculations.
3. System Incompleteness:
1. Often considered an incomplete accounting system.
4. Comparative Analysis Difficulty:
1. Comparing financial data with other businesses or periods may be
challenging.
Ascertaining Profits [Statement of Affairs method]
Net Worth Method:
Formula:
(Capital = Assets - Liabilities)
Explanation:
It calculates the difference between assets and liabilities to determine the
entity's net worth or capital.
Closing and Opening Capital:
Formula:
Closing Capital = Beginning Capital + Net Profit - Drawings
Opening Capital = Closing Capital + Net Profit - Drawings
Explanation:
To calculate the closing capital at the end of the year, add the beginning
capital to the net profit and subtract any drawings taken during the year. To
determine the opening capital at the beginning of the year, apply the same
formula using the closing capital from the previous year.
Profit Calculation:
Formula:
Profit = Closing Capital + Drawings - Additional Capital - Opening Capital
Explanation:
The profit is determined by adding the closing capital and any drawings made
during the period and then subtracting any additional capital invested and the
opening capital.
Statement to find profit.
Important Questions with Answers
1.
Aditya a retailer, has not maintained proper books of account but it has been
possible to obtain the following details:
Calculate the net profit for this year and draft the Statement of Affairs at the end
of the year after noting that:
(a) Shop Fittings are to be depreciated by 780.
(b) Aditya has drawn 100 per week for his own use.
(c) Included in the Trade Debtors is an irrecoverable balance of 270.
(d) Interest at 5% p.a. is due on the loan from Naresh but has not been paid for the
year.
Answer:
2.
Debtors at the beginning of the year were ​ 30,000, Sales on credit during the year
were 75,000, Cash received from the Debtors during the year was 35,000, Returns
Inward (regarding credit sales) were 5,000 and Bills Receivable drawn during the
year were 25,000. Find the balance of Debtors at th end of the year, assuming that
there were Bad Debts during the year of 2,000.
Answer:
3.
Creditors on 1st April, 2018 were ₹ 15,000, Purchases on credit were ₹ 30,000, Cash
paid to Creditors during 2018-19 was ₹ 20,000, Returns Outward (regarding credit
purchases) were ₹ 1,000 and Bills Payable accepted during the year were ₹ 10,000.
Find the balance of Creditors on 31st March, 2019.
Answer:
4.
The following information is given about an accounting year:
Opening Creditors ₹ 15,000; Cash paid to creditors ₹ 15,000; Returns Outward ₹
1,000 and Closing creditors ₹ 12,000. Calculate Credit Purchases during the year.
Answer:
NOTE : Worksheet (Important questions of all typology with
answers) is provided as a seperate PDF on website
padhleakshay.com
