ACCOUNTS FROM INCOMPLETE RECORDS - CA …...ACCOUNTS FROM INCOMPLETE RECORDS LEARNING OUTCOMES After...

ACCOUNTS FROM INCOMPLETE RECORDS

LEARNING OUTCOMES

After studying this chapter, you will be able to :

r Learnhowtoderivecapitalsattwodifferentpointsoftimethroughstatementofaffairs;

r Learn the technique of determining profit by comparingcapitalattwodifferentpointsoftime;

r Prepare trading and profit and loss account and balancesheetfromincompleterecords.

14CHAPTER

© The Institute of Chartered Accountants of India

14.2 ACCOUNTING

CHAPTER OVERVIEW

Typesofsingleentrysystem

Puresingleentry Simplesingleentry Quasisingleentry

• Singleentrysystemisgenerallyfoundinsoletradingconcernsorpartnershipfirms.• Singleentrysystemignorestheconceptofdualityandtherefore,transactionsare

notrecordedintheirtwo-foldaspects.

Onlypersonalaccounts are maintained

Personal accounts andcashbookare

maintained

Personalaccounts,cashbookandsubsidiarybooksaremaintained

General Techniques

Fresh Investmentbyproprietors or

partners

Distinction between

Business Expenses and Drawings

DerivationofInformationfrom

CashBook

Techniques ofobtainingcomplete

accounting information

AnalysisofSales Ledger and Purchase

Ledger


ACCOUNTS FROM INCOMPLETE RECORDS 14.3

1. INTRODUCTION

Veryoftensmallsoleproprietorshipandpartnershipbusinessesdonotmaintaindoubleentrybookkeepingsystem.Sometimestheykeeprecordofthecashtransactionsandcredittransactionsonly.Sometimestheydonotmaintainrecordsofalltransactions.Butattheendoftheaccountingperiodtheywanttoknowtheperformanceandfinancialpositionoftheirbusinesses.Thiscreatessomespecialproblemstotheaccountants.Thischapterdiscusseshowtocompletetheaccountsfromavailableincompleterecords.

Theterm“SingleEntrySystem”ispopularlyusedtodescribetheproblemsofaccountsfrom incomplete records. In practice, the quack accountants follow some hybridmethods.Forsometransactionstheycompletedoubleentries.Forsomeotherstheyjustmaintainoneentry.Stillforsomeothers,theyevendonotpassanyentry.Briefly,thismaybestatedasincompleterecords.Thetaskoftheaccountantistoestablishlinkageamongtheavailableinformationandtofinalisetheaccounts.

Features

• Itisaninaccurate,unscientificandunsystematicmethodofrecordingbusinesstransactions.

• Thereisgenerallynorecordofrealandpersonalaccountsand, inmostofthecases;arecordiskeptforcashtransactionsandpersonalaccounts.

• Cashbookmixesupbusinessandpersonaltransactionsoftheowners.

• Thereisnouniformityinmaintainingtherecordsandthesystemmaydifferfromfirmtofirmdependingontherequirementsandconvenienceofeachfirm.

• Profitunderthissystemisonlyanestimatebasedonavailableinformationandthereforetrueandcorrectprofitscannotbedetermined.Thesame is thecasewiththefinancialpositionintheabsenceofaproperbalancesheet.

2. TYPES

A scrutiny ofmany procedures adopted inmaintaining records under single entrysystembringsforththeexistenceoffollowingthreetypes:

(i) Pure single entry:Inthis,onlypersonalaccountsaremaintainedwiththeresultthatno information is available in respectof cash andbankbalances, salesandpurchases,etc.Inviewofitsfailuretoprovideeventhebasicinformationregarding cash etc., thismethod exists only on paper and has no practicalapplication.


14.4 ACCOUNTING

(ii) Simple single entry: In this,only: (a)personalaccounts,and (b)cashbookaremaintained.Althoughtheseaccountsarekeptonthebasisofdoubleentrysystem,postingsfromcashbookaremadeonlytopersonalaccountsandnootheraccountistobefoundintheledger.Cashreceivedfromdebtorsorcashpaidtocreditorsissimplynotedonthebillsissuedorreceivedasthecasemaybe.

(iii) Quasi single entry: Inthis:(a)personalaccounts,(b)cashbook,and(c)somesubsidiarybooksaremaintained.Themainsubsidiarybookskeptunderthissystem are Sales book, Purchases book and Bills book.No separate recordismaintainedfordiscounts,whichareenteredintothepersonalaccounts.Inaddition,somescatteredinformationisalsoavailableinrespectoffewimportantitemsofexpenseslikewages,rent,rates,etc.Infact,thisisthemethodwhichisgenerallyadoptedasasubstitutefordoubleentrysystem.

3. ASCERTAINMENT OF PROFIT BY CAPITAL COMPARISONThismethodisalsoknownasNet Worth method or Statement of Affairs Method.

Closing Capital – Opening Capital = ProfitIf detailed information regarding revenue and expenses is not known, it becomesdifficult toprepareprofitand lossaccount. Insteadbycollecting informationaboutassetsandliabilities,itiseasiertopreparebalancesheetattwodifferentpointsoftime.So,whilepreparingaccountsfromincompleterecords,ifsufficientinformationisnotavailable,itisbettertofollowthemethodofcapitalcomparisontoarriveattheprofitfigure.

3.1 Methods of Capital ComparisonCapitalisincreasedifthereisprofit,whilecapitalisreducedifthereisloss.However,iftheproprietor/partnersmadefreshinvestmentsinthebusiness,capitalisincreased;iftheymakewithdrawalcapitalisreduced.Sowhiledeterminingtheprofitbycapitalcomparison,thefollowingrulesshouldbefollowed.

Particulars `

Capital at the end (a) …. Add:Drawings .... Less:Freshcapitalintroduced .....Capital at the beginning (b) .....Profit (a-b) .....

It is clear from theabovediscussion that to follow the capital comparisonmethodoneshouldknowtheopeningcapitalandclosingcapital.Thisshouldbedeterminedbypreparingstatementofaffairsatthetworespectivepointsoftime.Capitalalwaysequalsassetsminusliabilities.



Thuspreparationofstatementofaffairswillrequirelistingupofassetsandliabilitiesandtheiramount. Theaccountantutilisesthefollowingsourcesforthepurposeoffindingouttheassetsandliabilitiesofabusinessenterprise: (i) Cashbookforcashbalance (ii) Bankpassbookforbankbalance (iii) Personalledgerfordebtorsandcreditors (iv) Inventorybyactualcountingandvaluation. (v) Asregardsfixedassets,hepreparesalistofthem.Theproprietorwouldhelp

him bydisclosing the original cost and date of purchase. After deductingreasonable amount of depreciation, thewrittendownor depreciated valuewouldbeincludedintheStatementofAffairs.

Afterobtainingallnecessaryinformationaboutassetsandliabilities,thenexttaskoftheaccountantsistopreparestatementofaffairsattwodifferentpointsoftime.Thedesignofthestatementofaffairsisjustlikebalancesheetasgivenbelow:

Statement of affairs as on ...............

Liabilities ` Assets `

Capital(Bal.Fig.)Loans,BankoverdraftSundrycreditorsBillspayableOutstanding expenses

xxxxxxxx

BuildingMachineryFurnitureInventorySundrydebtorsBillsreceivableLoans and advancesCashandbankPrepaid expenses

xxxxxxxxxxxxxxxxxx

xx xx

Now from the statement of affairs prepared for two different dates, opening andclosingcapitalbalancescanbeobtained.


14.6 ACCOUNTING

3.2 Difference between Statement of Affairs and Balance Sheet

Basis Statement of affairs Balance sheet

Reliability It is prepared on the basis oftransactions partly recordedon the basis of double entrybookkeepingandpartlyonthebasis of single entry. Most ofthe assets are recorded on the basisof estimates, assumptions,information gathered frommemoryratherthanrecords.

Itisbasedontransactionsrecordedstrictly on the basis of doubleentry book keeping; each item inthe balance sheet can be verifiedfromtherelevantsubsidiarybooksand ledger. Hence the balancesheet isnotonlyreliable,butalsodependable.

Capital In this statement, capital ismerelyabalancingfigurebeingexcess of assets over capital.Henceassetsneednotbeequaltoliabilities.

Capital isderived fromthecapitalaccountintheledgerandthereforethetotalofassetssidewillalwaysbe equal to the total of liabilitiesside.

Omission Sincethisstatementispreparedon the basis of incompleterecords, it is very difficult, tolocatetheassetsandliabilities,iftheyareomittedfromthebooks.

Thereisnopossibilityofomissionof any item of asset and liabilitysince all items are properlyrecorded. Moreover, it is easy tolocatethemissing itemssincethebalancesheetwillnotagree.

Basis ofValuation

The valuation of assets isgenerally done in an arbitrarymanner;thereforenomethodofvaluationisdisclosed.

The valuation of assets is doneon scientific basis, that is originalcostinthecaseofnewassetsanddepreciated amount on the basisofcostminusdepreciationtodateforusedassets.Anychangeinthemethod of valuation is properlydisclosed.

Objects The object of preparing thisstatement in the calculation ofcapitalfigures in thebeginningandattheendoftheaccountingperiodrespectively.

Theobjectofpreparingthebalancesheet is to ascertain the financialpositiononaparticulardate.

3.3 Preparation of Statement of Affairs and Determination of Profit

IthasbeendiscussedinPara3.1thatfiguresofassetsandliabilitiesshouldbecollectedforpreparationofstatementofaffairs.Givenbelowanexample:© The Institute of Chartered Accountants of India


ILLUSTRATION 1Assets and Liabilities of Mr. X as on 31-12-2015 and 31-12-2016 are as follows:

31-12-2015 31-12-2016

` `

Assets

Building

Furniture

Inventory

Sundry debtors

Cash at bank

Cash in hand

1,00,000

50,000

1,20,000

40,000

70,000

1,200

?

?

2,70,000

90,000

85,000

3,200Liabilities

Loans

Sundry creditors

1,00,000

40,000

80,000

70,000

Decided to depreciate building by 2.5% and furniture by 10%. One Life Insurance Policy of the Proprietor was matured during the period and the amount ` 40,000 is retained in the business. Proprietor took @ ` 2,000 p.m. for meeting family expenses.Prepare Statement of Affairs.Solution

Statement of Affairsas on 31-12-2015 & 31-12-2016

Liabilities 31-12-15 31-12-16 Assets 31-12-15 31-12-16

` ` ` `

Capital(Bal.Fig.)LoansSundrycreditors

2,41,200

1,00,00040,000

4,40,700

80,00070,000

BuildingFurnitureInventorySundrydebtorsCashatbankCash in hand

1,00,00050,000

1,20,00040,00070,0001,200

97,50045,000

2,70,00090,00085,0003,200

3,81,200 5,90,700 3,81,200 5,90,700


14.8 ACCOUNTING

ILLUSTRATION 2Take figures given in Illustration 1. Find out profit of Mr. X.Solution

Determination of Profit by applying the method of the capital comparison

`

CapitalBalanceason31-12-2016Less:Freshcapitalintroduced

Add:Drawings(`2000×12)

Less:CapitalBalanceason31-12-2015

Profit

4,40,700(40,000)4,00,70024,0004,24,700(2,41,200)

1,83,500 Note : • Closingcapitalisincreasedduetofreshcapitalintroduction,soitisdeducted. • Closing capitalwas reduceddue towithdrawal by proprietor; so it is added

back.

ILLUSTRATION 3A and B are in Partnership having Profit sharing ratio 2:1. The following information is available about their assets and liabilities:

31-3-2016 31-3-2017

` `

FurnitureAdvancesCreditorsDebtorsInventoryLoanCash at Bank

1,20,00070,00032,00040,00060,00080,000

?50,00030,00045,00074,750

—50,000 1,40,000

The partners are entitled to salary@`2,000p.m.Theycontributedproportionatecapital.Interestispaid@6%oncapitalandcharged@10%ondrawings.



Drawings of A and B

A B` `

April 30May 31June 30Sept. 30Dec. 31Feb. 28

2,000—

4,000—

2,000—

—2000

—6,000

—8,000

On 30th June, they took C as 1/3rd partner who contributed ` 75,000. C is entitled to share of 9 months’ profit. The new profit ratio becomes 1:1:1. A withdrew his proportionate share. Depreciate furniture @ 10% p.a., new purchases ` 10,000 may be depreciated for 1/4th of a year.

Current account balances as on 31-3-2016: A ` 5,000 (Cr.), B ` 2,000 (Dr.)Prepare Statement of Profit, Current Accounts of partners and Statement of Affairs as on 31-3-2017.Solution

Statement of AffairsAs on 31-3-2016 and 31-3-2017

Liabilities 31-3-2016 31-3-2017 Assets 31-3-2016 31-3-2017` ` ` `

CapitalA/c’s

A

B

C

Loan

Creditors

CurrentA/c’s

A

B

C

1,50,000

75,000

—

80,000

32,000

5,000

—

75,000

75,000

75,000

—

30,000

74,036*

48,322*

50,142*

FurnitureAdvancesInventoryDebtorsCashatbankCurrentA/cB

1,20,00070,00060,00040,00050,0002,000

1,17,75050,00074,75045,000

1,40,000—

3,42,000 4,27,500 3,42,000 4,27,500


14.10 ACCOUNTING

*SeecurrentA/cs.Notes:(i) Depreciation on Furniture

10%on`1,20,000

10%on`10,000for1/4year

12,000

25012,250

(ii) Furniture as on 31-3-2016

Balanceason31-3-2016

Add:newpurchase

Less:Depreciation

1,20,000

10,0001,30,000

(12,250)1,17,750

(iii) Total of Current Accounts as on 31-3-2017

TotalofAssets(1,17,750+50,000+74,750+45,000+1,40,000)

Less:FixedCapital(75,000+75,000+75,000)+Liabilities(30,000)

4,27,500

(2,55,000)1,72,500

Thisisafteraddingsalary,interestoncapitalanddeductingdrawingsandinterestondrawings.(iv) InterestonCapital: `

A: onon

1,50,00075,000

@6%for3months@6%for9months

2,2503,3755,625

B: on 75,000 @6%for1year 4,5003,375C: on 75,000 @6%for9months7,875

(v) InterestonDrawings:A: on

onon

2,0004,0002,000

@10%for11months@10%for9months@10%for3months

18330050533

B: ononon

2,0006,0008,000

@10%for10months@10%for6months@10%for1month

16730067534



AllocationofProfit

3monthsProfit

9monthsProfit

A:2/3×`28,767+1/3×`86,300

B:1/3×`1,15,067

C:1/3×`86,300

`1,15,067

`28,767

`86,300

= `47,944

= `38,356

= `28,767`1,15,067

Current AccountsA B C A B C

To Balance b/d

— 2,000 — ByBalanceb/d 5,000 — —

To Drawings 8,000 16,000 — BySalary 24,000 24,000 18,000To Interest on drawings 533 534

— By Interest onCapital 5,625 4,500 3,375

To Balance c/d(b.f.)

74,036 48,322 50,142 By Share ofProfit

47,944 38,356 28,767

82,569 66,856 50,142 82,569 66,856 50,142

Statement of Profit`

CurrentAccountBalancesason31-3-2017Less:SalaryA`2,000×12 =24,000 B ` 2,000×12 =24,000 C `2,000×9 =18,000Less:InterestonCapital A 5,625 B 4,500 C 3,375Add:Drawings A 8,000 B 16,000Add:InterestonDrawings A 533 B 534

Less:CurrentA/CBalanceason31-3-2016(`5,000–`2,000)

1,72,500

(66,000)

(13,500)

24,000

1,0671,18,067(3,000)

1,15,067


14.12 ACCOUNTING

ILLUSTRATION 4The Income Tax Officer, on assessing the income of Shri Moti for the financial years 2015-2016 and 2016-2017 feels that Shri Moti has not disclosed the full income. He gives you the following particulars of assets and liabilities of Shri Moti as on 1st April, 2015 and 1st April, 2017.

`

1-4-2015 Assets : Cash in hand 25,500Inventory 56,000Sundry debtors 41,500Land and Building 1,90,000Wife’s Jewellery 75,000

Liabilities : Owing to Moti’s Brother 40,000Sundry creditors 35,000

1-4-2017 Assets : Cash in hand 16,000Inventory 91,500Sundry debtors 52,500Land and Building 1,90,000Motor Car 1,25,000Wife’s Jewellery 1,25,000Loan to Moti’s Brother 20,000

Liabilities : Sundry creditors 55,000

During the two years the domestic expenditure was ` 4,000 p.m. The declared income of the financial years were ` 1,05,000 for 2015-2016 and ` 1,23,000 for 2016-2017 respectively.State whether the Income-tax Officer’s contention is correct. Explain by giving your workings.Solution

Capital Account of Shri Moti1-4-2015 1-4-2017

` ` ` `

AssetsCash in hand 25,500 16,000Inventory 56,000 91,500Sundrydebtors 41,500 52,500Land & Building 1,90,000 1,90,000Wife’sJewellery 75,000 1,25,000



Motor Car — 1,25,000LoantoMoti’sBrother — 20,000

3,88,000 6,20,000Liabilities:OwingtoMoti’sBrother 40,000 —Sundrycreditors 35,000 75,000 55,000 55,000Capital 3,13,000 5,65,000Incomeduringthetwoyears:Capitalason1-4-2017 5,65,000Add:Drawings–DomesticExpenses for the twoyears (` 4,000×24months)

96,000

6,61,000Less:Capitalason1-4-2015 (3,13,000)Incomeearnedin2015-2016and2016-2017 3,48,000Incomedeclared(`1,05,000+`1,23,000) 2,28,000SuppressedIncome 1,20,000

TheIncome-taxofficer’scontentionthatShriMotihasnotdeclaredhistrueincomeiscorrect.ShriMoti’strueincomeisinexcessofthedisclosedincomeby`1,20,000.

4. TECHNIQUES OF OBTAINING COMPLETE ACCOUNTING INFORMATION

Whenbooksofaccountsareincomplete,itisessentialinthefirstinstancetocompletedoubleentryinrespectofalltransactions.ThewholeaccountingprocessshouldbecarefullyfollowedandTrialBalanceshouldbedrawnup.4.1 General TechniquesWheretheaccountsofabusinessareincomplete,itisadvisabletoconvertthemfirstto thedoubleentrysystemandthentodrawuptheProfitandLossAccountandtheBalance Sheet, insteadof determining the amountof profit/loss bypreparingthestatementofaffairs.Asbooksofaccountsofdifferentfirmsbeing incompleteinvaryingdegrees,itisnotpossibletosuggestaformulawhichcoulduniformlybeappliedforpreparingfinalaccountstherefrom.Asageneralrule,itisessentialfirsttostarttheledgeraccountswiththeopeningbalancesofassets,liabilitiesandthecapital.Afterwards,eachbookoforiginalentryshouldbeseparatelydealtwith,soastocompletethedoubleentrybypostingintotheledgersuchentriesashavenotbeenposted.Forexample,IfonlypersonalaccountshavebeenpostedfromtheCashBook,debitsandcreditspertainingtonominalaccountsandrealaccountsthatarenotposted,shouldbepostedintotheledger.IfthereareDiscountColumnsintheCashBook,thetotalsofdiscountspaidandreceivedshouldbepostedtoDiscounts


14.14 ACCOUNTING

AllowedandDiscountsReceivedAccounts respectively, forcompleting thedoubleentry.Afterwards, theother subsidiarybooks, i.e., PurchasesDayBook, SalesDayBook,ReturnBookandBillsReceivableandPayable,etc. shouldbe totaledupand theirtotalspostedintotheledgertothedebitorcreditoftheappropriatenominalorrealaccounts,thepersonalaspectofthetransactionshavingbeenpostedalready.WhenanAccountantisengagedinpostingtheunposteditemsfromtheCashBookandothersubsidiarybooks,hemaybeconfrontedwithanumberofproblems.Themannerinwhichsomeofthemmaybedealtwithisdescribedbelow: (1) In the Cash Book, there might be entered several receipts which have no

connection with the business but which belong to the proprietor, e.g.,interestcollectedonhisprivateinvestment,legaciesreceivedbyhim,amountcontributedbytheproprietorfromhisprivateresources,etc.Allthoseamountsshould be credited to his capital account. Also the Cash Bookmay containentriesinrespectofpaymentsforproprietor’spurchasesmadebythebusiness.Allsuchitemsshouldbedebitedtohiscapitalaccount.

(2) Amounts belonging to the business after collectionmay have been directlyutilisedforacquiringbusinessassetsorformeetingcertainexpensesinsteadofbeingdepositedintotheCashBook.Ontheotherhand,theproprietormayhavemet someof thebusiness expenses fromhisprivate resources. In thatcase, the appropriate asset or expense account should be debited and thesourcewhichhadprovidedfundscredited.

(3) If cash is short, because the proprietor hadwithdrawn amountwithout anyentry having been made in the cash book the proprietor’s capital accountshouldbedebited.Infact,itwillbenecessarytodebitorcredittheproprietor’scapitalaccountinrespectofallunidentifiedamountswhichcannotbeadjustedotherwise.

(4) Wherethebenefitofanitemofanexpenseisreceivedbothbytheproprietorandbusiness, then it shouldbeallocatedbetween themon someequitablebasis e.g. rent of premises when the proprietor lives in the same premises,shouldbeallocatedonthebasisoftheareaoccupiedbyhimforresidence.

Intheend,itwillbepossibletoextractaTrialBalance.Studentsareadvisedalwaystodosoasitwilldiscloseanymistakescommittedinmakingadjustments.4.2 Derivation of Information from Cash BookTheanalysisofcashaswellasbankreceiptsandpayments,shouldbeextensivebutunder significant heads, so that various items of income and expenditure can bepostedtherefromintotheledger.Howeverbeforepostingtheinformationintothe



ledgerthesameshouldbecollectedintheformofanaccount,thespecimenwhereofisshownbelow:Cash and Bank Summary Account for the year ended (assumed figures)

Cash Bank Cash Bank` ` ` `

To Balance in hand (opening)

590 7,400 ByExpenses(Sundry payments)

3,000 -

To Sales 6,500 - ByPurchases 100 6,000ToCollectionfrom BySundrycreditors - 5,000debtors - 10,000 ByDrawings 1,500 -

ByPettyexpenses 800 -ByRent - 1,000ByElectricityandwater 350 -ByRepairs 350 -ByWages - 1,000ByBalanceinHand 990 4,400

7,090 17,400 7,090 17,400Theimportantpointaboutincompleterecordsisthatmuchoftheinformationmaynotbereadilyavailableandthattherelevant informationhastobeascertained.AgoodpointistoprepareCashandBankSummary(ifnotavailableinproperformwithbothsidestallied).Thecashandbankbalanceattheendshouldbereconciledwiththecashandbankbooks.Havingdoneso,thevariousitemsdetailedontheSummaryStatements,shouldbepostedintotheledger.Itisquitelikelythatsomeofthemissinginformationwillthenbeavailable.Considerthefollowingaboutafirmrelatingto2016:

`

CashBalanceon1stJan.,2016 250Bankoverdrafton1stJan.,2016 5,400Cash purchases 3,000CollectionfromSundrydebtors 45,600Saleofoldfurniture 750PurchaseofMachinery 12,000PaymentofSundrycreditors 26,370Expenses 8,450FreshCapitalbroughtin 5,000Drawings 3,230CashBalanceon31stDec.,2016 310Bankbalanceon31stDec.,2016 1,180


14.16 ACCOUNTING

NowpreparethecashandBankSummary.

Cash and Bank Summary

Dr. Cr.` `

CashBalanceason1-1-2016 250 Bankoverdraft 5,400CollectionfromSundrydebtors 45,600 Cash purchases 3,000Saleofoldfurniture 750 PurchaseofMachinery 12,000FreshCapitalbroughtin 5,000 PaymenttoSundrycreditors 26,370Balancingfigure 8,340 Expenses 8,450

Drawings 3,230Cashbalanceon31-12-2016 310Bankbalanceon31-12-2016 1,180

59,940 59,940

See thatdebit side is shortby` 8,340.Whatmaybe thepossible sourceof cashinflow?

Maybecashsales.

4.3 Analysis of Sales Ledger and Purchase Ledger

Sales Ledger: Itwoulddiscloseinformationpertainingtotheopeningbalanceofthedebtors,thegoodssoldtothemoncreditduringtheyear,billsreceivabledishonored,if any; cash received from them in theaccountingperiod,discount, rebateor anyotherconcessionallowedtothem,receiptsofbillsreceivable,returnsinwards,baddebtswrittenoffandtransfers.Journalentriesmustbemadebydebitingorcreditingtheimpersonalaccountsconcernedwithcontracreditordebitgiventototaldebtorsaccount.

Analysis of Sales Ledger of the year

OPCustomerBalance

Sales BillsDisho-noured

Total Debits

Cash Recd.

Discounts Allowed

Bills Recd.

Sales Returns

Bad Debts

Total credit

Balance (cl.)

Fromtheaforementioned,itwillbepossibletobuildupinformationaboutsalesandotheraccountswhichcan thenbeposted in totals, if sodesired. ItwouldalsobepossibletoprepareTotalDebtors.



Accountinthefollowingform:

Total Debtors Account (assumed figures)

` `

Openingbalance 5,000 Cash/Bank 10,000Sales 38,000 Discount 500Bills dishonored 280 Billsreceivable 20,000Interest 100 Baddebts 280

Closingbalance 12,60043,380 43,380

ItisevidentthatanysingleamountcomprisedinthetotalDebtorsAccountcanbeascertainediftheotherfiguresareprovided.Forinstance,iftheinformationaboutsales isnotavailable itcouldbeascertainedasabalancingfigure, i.e., inthetotalDebtorsAccountgivenabove,ifallotherfiguresaregiven,amountofsalesoncreditbasiscanbeeasilyascertained.Purchases Ledger: Generally speaking, aPurchases Ledger isnotas commonly inexistenceastheDebtorsLedgerforitbeingconvenienttomakeentriesinrespectofoutstandingliabilitiesatthetimetheyarepaidratherthanwhentheyareincurred.The information isavailable in respectofopeningbalanceof thecreditors,goodspurchasedoncredit,billspayabledishonored;cashpaidtothecreditorsduringtheyear,discountandotherconcessionsobtained,returnsoutwardsandtransfers.Herealso,journalentriesmustbemadebydebitingorcreditingtherespectiveimpersonalaccounts.Contracreditordebitbeinggiventototalcreditor’saccount.Ifaproperrecordofreturntocreditors,discountallowedbythemetc.,hasnotbeenkept, itwillnotbepossibletowriteuptheTotalCreditorsA/c. Insuchacase,netcreditpurchasewillbeascertainedasfollows:CashpaidtoCreditorsincludingonaccountofbillspayableduringtheperiod ...................ClosingbalanceofCreditorsandBillsPayable ................... Total ___________Less:OpeningbalanceofCreditorsandBillsPayable ...................Netcreditpurchaseduringtheperiod ...................AlternativelyCashpaidtocreditorsduringtheperiod ...................Add:BillsPayableissuedtothem ................... Total __________ClosingbalanceofCreditorsLess:Openingbalanceofcreditors ...................Credit Purchases during the period ...................Theinformationmayalsobeputintheformofanaccount,justliketheTotalDebtorsAccount.


14.18 ACCOUNTING

Nominal Accounts :Itisquitelikelythatthetotalexpenditureshownbybalanceofnominalaccountmaycontainitemsofexpenditurewhichdonotrelatetotheyearforwhichaccountsarebeingpreparedand, also, theremayexist certain itemsofexpenditure incurredbutnotpaid,whichhavenotbeen includedtherein.Onthataccount,eachandeveryaccount shouldbeadjusted in themanner shownbelow(figuresassumed):

Cash and Particulars

Amount Bank Payment

Paid out of Accrued

Total Private Fund

Pre Payment

Expenses for the period

1 2 3 4 5(2+3+4) 6 7(5-6)` ` ` ` ` `

Rent & Rates 2,200 300 100 2,600 150 2,450Salaries 4,500 500 1,000 6,000 250 5,750

Only the amount entered as “expenses for the period” should be posted to therespectivenominalaccounts.Asimilaradjustmentofnominalaccountsinrespectofrevenuereceiptshouldbemade.Letuscontinuewiththeexamplegiveninpara4.2.Givensomeotherinformation,howtocomputecreditpurchaseandcreditsaleisdiscussedbelow:

Openingbalance(1-1-2016) `

Inventory 20,000Sundrycreditors 12,300Sundrydebtors 15,000ClosingBalance(31-12-2016)Inventory 15,000Sundrycreditors 13,800Sundrydebtors 25,600Discountreceivedduring2016 1,130Discount allowed 1,870

Whatarethepurchasesfor2016?LetuspreparetheSundryCreditorsAccount.

Sundry Creditors Account

` `

ToCash(exampleinpara4.2) 26,370 ByBalanceb/d 12,300ToDiscount(received) 1,130 (opening)ToBalancec/d(closing) 13,800 By Purchases (balancing

figure)29,000

41,300 41,300



The credit purchases are `29,000;cashpurchasesare`3,000(exampleinpara4.2):hence total purchases are `32,000.

LikewisepreparetheSundryDebtorsAccount:

Sundry Debtors Account

` `

ToBalanceb/d 15,000 ByCash(exampleinpara4.2) 45,600ToCreditsales(balancingfigure)

58,070 ByDiscount(allowed) 1,870

ByBalancec/d 25,60073,070 73,070

Sototalsales =creditsales+cashsales = `58,070+`8,340(exampleinpara4.2)=`66,4104.4 Distinction between Business Expenses and DrawingsIthasbeenalreadystatedthatoftenthedistinctionisnotmadebetweenbusinessexpensesanddrawings.While completingaccounts from incomplete records, it isnecessary to scan the business transactions carefully to identify the existence ofdrawings.The main items of drawings are (illustrative): • rentofpremisescommonlyusedforresidentialaswellasbusinesspurposes; • commonelectricityandtelephonebills; • lifeinsurancepremiumsofproprietor/partnerspaidfrombusinesscash; • householdexpensesmetfrombusinesscash; • privateloanpaidtofriendsandrelativesoutofbusinesscash; • personalgiftsmadetoanyfriendsandrelativesoutofbusinesscash; • goodsorservicestakenfromthebusinessforpersonalconsumption; • cashwithdrawalstomeetfamilyexpenses.Soitisnecessarytoscanthesummaryofcashtransactions,businessresourcesandtheirutilisationtoassessthenatureofdrawingsanditsamount.4.5 Fresh Investment by proprietors / partnersLikedrawings,oftenfreshinvestmentsmadebyproprietors’partnersarenotreadilyidentifiable.Itbecomesnecessarytoscanthebusinesstransactionscarefully.Apartfromdirectcashinvestment,freshinvestmentsmaytakethefollowingshape: • MoneycollectedandputinthebusinessonmaturityofLifeInsurancePolicy

oftheproprietors; • Interestanddividendofpersonalinvestmentoftheproprietorscollectedand

putinthebusiness; • Incomefromnon-businesspropertycollectedandputinthebusiness.


14.20 ACCOUNTING

Unlesstheseitemsareproperlyidentifiedandsegregated,businessincomewillbeaffectedandproperstatementofaffairscannotbeprepared.

ILLUSTRATION 5The following information relates to the business of Mr. Shiv Kumar, who requests you to prepare a Trading and Profit & Loss Account for the year ended 31st March, 2017 and a Balance Sheet as on that date:(a)

Balance as on 31st March, 2016 `

Balance as on 31st March, 2017 `

Building 3,20,000 3,60,000Furniture 60,000 68,000Motorcar 80,000 80,000Inventory ? 40,000Bills payable 28,000 16,000Cash and bank balances 1,80,000 1,04,000Sundry debtors 1,60,000 ?Bills receivable 32,000 28,000Sundry creditors 1,20,000 ?

(b) Cash transactions during the year included the following besides certain other items:

` `

Sale of old papers and miscellaneous income

20,000 Cash purchases 48,000

Miscellaneous Trade expenses (including salaries etc.)

80,000 Payment to creditors 1,84,000

Collection from debtors 2,00,000 Cash sales 80,000

(c) Other information: • Bills receivable drawn during the year amount to ` 20,000 and Bills payable

accepted ` 16,000. • Some items of old furniture, whose written down value on 31st March, 2016 was

` 20,000 was sold on 30th September, 2016 for ` 8,000. Depreciation is to be provided on Building and Furniture @ 10% p.a. and on Motorcar @ 20% p.a. Depreciation on sale of furniture to be provided for 6 months and for additions to Building for whole year.

• Of the Debtors, a sum of ̀ 8,000 should be written off as Bad Debt and a reserve for doubtful debts is to be provided @ 2%.



• Mr. Shivkumar has been maintaining a steady gross profit rate of 30% on turnover.

• Outstanding salary on 31st March, 2016 was ` 8,000 and on 31st March, 2017 was ̀ 10,000. On 31st March, 2016, Profit and Loss Account had a credit balance of ` 40,000.

• 20% of total sales and total purchases are to be treated as for cash. • Additions in Furniture Account took place in the beginning of the year and there

was no opening provision for doubtful debts.

SolutionTrading and Profit and Loss Account of Mr. Shiv Kumar

for the year ended 31st March, 2017

` `

ToOpeninginventory (balancingfigure)

80,000 BySales(3,20,000*×100/80)ByClosinginventory

4,00,00040,000

To Purchases (1,92,000x100/80)

2,40,000

ToGrossprofitc/d@30%onsales 1,20,000

4,40,000 4,40,000To Miscellaneous expenses (`80,000–`8,000+`10,000)

82,000 ByGrossprofitb/dByMiscellaneous receipts By Net loss transferred to CapitalA/c(b.f.)

1,20,00020,00025,840

ToDepreciation: Building `36,000 Furniture `7,800(`6,800+`1,000) Motor Car `16,000 59,800ToLossonsaleoffurniture 11,000ToBaddebts 8,000ToProvisionfordoubtful debts

5,0401,65,840 1,65,840

*Total Sales (80,000 x 10020 )-Cash Sales (80,000)


14.22 ACCOUNTING

Balance Sheet of Mr. Shivkumaras on 31st March, 2017

Liabilities ` ` Assets ` ` Capital as on 1st April,2016

7,16,000 Building Add:Addition duringtheyear

3,20,00040,000

ProfitandLossA/cOpeningbalance

40,000 Less:Provisionfor depreciation

3,60,000(36,000)

3,24,000Less:Lossfortheyear

(25,840) 14,160 FurnitureLess:Soldduring

60,000

Sundrycreditors 1,12,000 theyear (20,000)Billspayable 16,000 40,000Outstanding salary 10,000

Add:Additionduring theyear

28,00068,000

Less:Depreciation (6,800) 61,200Motorcar(atcost) 80,000Less:Depreciation (16,000) 64,000Inventoryintrade 40,000Sundrydebtors 2,52,000Less:Provisionfordoubtfuldebts@2% (5,040) 2,46,960Billsreceivable 28,000Cash in hand and at bank

1,04,000

8,68,160 8,68,160



Working Notes:(i) Sundry Debtors Account

` `

ToBalanceb/dToSalesA/c(credit)

1,60,0003,20,000

ByCash/BankA/cByBillsReceivableA/cByBaddebtsA/cByBalancec/d(bal.fig.)

2,00,00020,0008,000

2,52,0004,80,000 4,80,000

(ii) Sundry Creditors Account

` `

ToCash/BankA/c

ToBillsPayableA/c

ToBalancec/d

(bal.fig.)

1,84,000

16,000

1,12,000

ByBalanceb/d

ByPurchasesA/c

1,20,000

1,92,000

3,12,000 3,12,000

(iii) Bills Receivable Account

` `

ToBalanceb/d

ToSundryDebtorsA/c

32,000

20,000

ByCash/BankA/c(bal.fig.)

ByBalancec/d

24,000

28,00052,000 52,000

(iv) Bills Payable Account

` `

ToCash/BankA/c(bal.fig.)

ToBalancec/d

28,000

16,000

ByBalanceb/d

BySundryCreditorsA/c

28,000

16,00044,000 44,000


14.24 ACCOUNTING

(v) Furniture Account

` `

ToBalanceb/d

ToBankA/c(b.f.)

60,000

28,000

ByBank/CashA/c

ByDepreciationA/c(onfurnituresold)

ByProfitandlossA/c(lossonsale)(20,000–1,000–8,000)

ByDepreciationA/c(68,000x10%)

ByBalancec/d(68,000–6,800)

8,000

1,000

11,000

6,800

61,20088,000 88,000

(v) Cash/Bank Account

` `

ToBalanceb/dToMiscellaneousreceiptsA/cToSundrydebtorsA/cToSalesA/cToFurnitureA/c(sale)ToBillsreceivableA/c

1,80,00020,000

2,00,00080,0008,00024,000

ByMisc.tradeexpensesA/cByPurchasesA/cByFurnitureA/cBySundrycreditorsA/cByBillspayableA/cBy Building A/c (3,60,000 – 3,20,000)ByBalancec/d

80,00048,00028,000

1,84,00028,00040,000

1,04,000

5,12,000 5,12,000

(vii) Opening Balance Sheet of Mr. Shivkumar as on 31st March, 2016


Capital(balancingfigure)ProfitandlossA/cSundryCreditorsBillsPayableOutstandingsalary

7,16,00040,000

1,20,00028,0008,000

BuildingFurnitureMotor carInventoryintradeSundryDebtorsBillsReceivableCashinhandandatbank

3,20,00060,00080,00080,000

1,60,00032,000

1,80,0009,12,000 9,12,000



ILLUSTRATION 6

A. Adamjee keeps his books on single entry basis. The analysis of the cash book for the year ended on 31st December, 2016 is given below:

Receipts ` Payments `

Bank Balance as on 1st January, 2016Received from Sundry DebtorsCash SalesCapital brought during the yearInterest on Investments

2,800

48,000

11,000

6,000200

Payments to Sundry creditorsSalariesGeneral expensesRent and TaxesDrawingsCash purchasesBalance at Bank on 31st Dec., 2016Cash in hand on 31st Dec., 2016

35,0006,5002,5001,5003,600

12,0006,400

50068,000 68,000

Particulars of other assets and liabilities are as follows:

1st January, 2016 31st December, 2016Sundry debtorsSundry creditorsMachineryFurnitureInventoryInvestments

14,5005,8007,5001,2003,9005,000

17,6007,9007,5001,2005,7005,000

Prepare final accounts for the year ending 31st December, 2016 after providing depreciation at 10 percent on machinery and furniture and ` 800 against doubtful debts.

Solution

A. Adamjee

Trading and Profit & Loss Account for the year ended 31-12-2016

` ` `

ToOpeningInventory 3,900 BySales 62,100To Purchases 49,100 ByClosingInventory 5,700ToGrossprofitc/d(b.f.) 14,800

67,800 67,800To Salaries 6,500 ByGrossProfitb/d 14,800


14.26 ACCOUNTING

To Rent and Taxes 1,500 ByInterestoninvestment 200To General expenses 2,500ToDepreciation:Machinery@10% 750Furniture@10% 120 870To Provision for doubtful debts

800

ToBalancebeingprofitcarriedtoCapitalA/c(b.f.) 2,830

15,000 15,000

Balance Sheet as on 31st December, 2016

Liabilities ` ` Assets ` `

A.Adamjee’sCapital Machinery 7,500on1stJanuary,2016 29,100 Less:Depreciation (750) 6,750Add:FreshCapital 6,000 Furniture 1,200Add:Profitfortheyear 2,830 Less:Depreciation (120) 1,080

37,930Less:Drawings (3,600) 34,330 Inventory-in-trade 5,700

Sundrydebtors 17,600Sundrycreditors 7,900 Less:Provisionfor

Doubtfuldebts (800) 16,800Investment 5,000Cashatbank 6,400Cash in hand 500

42,230 42,230

Working Notes :

1. Balance sheet of A. Adamjee as on 1-1-2016

` `

Sundrycreditors 5,800 Machinery 7,500A.Adamjee’scapital 29,100 Furniture 1,200(balancingfigure) Inventory 3,900

Sundrydebtors 14,500Investments 5,000Bankbalance(fromCashstatement) 2,800

34,900 34,900



2. Ledger Accounts A. Adamjee’s Capital Account

` `

Dec.31 To Drawings 3,600 Jan.1 ByBalance 29,100Dec.31 ToBalancec/d(b.f.) 31,500 Dec.31 ByCash 6,000

35,100 35,100Sales Account

` `

Dec.31 ToTradingA/c(b.f.) 62,100 Dec.31 ByCash 11,000Dec.31 ByTotalDebtors

Account51,100

62,100 62,100

Total Debtors Account

` `

Jan.1 ToBalanceb/d 14,500 Dec.31 ByCash 48,000Dec.31 To Credit sales 51,100 Dec.31 ByBalancec/d 17,600

(Balancingfigure)65,600 65,600

Jan.1 ToBalanceb/d 17,600

Purchases Account

` `

Dec.31 ToCashA/c 12,000 Dec.31 ByTradingAccount(b.f.) 49,100To Total Creditors A/c

37,100

49,100 49,100

Total Creditors Account

` `

Dec.31 To Cash 35,000 Jan.1 ByBalanceb/d 5,800Dec.31 ToBalanceb/d 7,900 Dec.31 ByCreditPurchases 37,100

(Balancingfigure)42,900 42,900


14.28 ACCOUNTING

ILLUSTRATION 7

From the following data, you are required to prepare a Trading and Profit and Loss Account for the year ended 31st March, 2017and a Balance Sheet as at that date. All workings should form part of your answer.

Assets and Liabilities As on1st April 2016

As on31st March 2017

` ` Creditors 15,770 12,400Sundry expenses outstanding 600 330Sundry Assets 11,610 12,040Inventory in trade 8,040 11,120Cash in hand and at bank 6,960 8,080Trade debtors ? 17,870Details relating to transactions in the year:Cash and discount credited to debtors 64,000Sales return 1,450Bad debts 420Sales (cash and credit) 71,810Discount allowed by trade creditors 700Purchase returns 400Additional capital-paid into Bank 8,500Realisations from debtors-paid into Bank 62,500Cash purchases 1,030Cash expenses 9,570Paid by cheque for machinery purchased 430Household expenses drawn from Bank 3,180Cash paid into Bank 5,000Cash drawn from Bank 9,240Cash in hand on 31-3-2017 1,200Cheques issued to trade creditors 60,270



SolutionTrading and Profit & Loss Account

for the year ending 31st March, 2017

` ` ` `

ToOpeningInventory 8,040 BySales: Cash 4,600

To Purchases (58,000+1,030)

59,030 Credit 67,210

Less:Returns (400) 58,630 71,810ToGrossprofitc/d(b.f.) 14,810 Less:Returns (1,450) 70,360

ByClosinginventory

11,120

81,480 81,480To Sundry expenses (W.N.(v))

9,300 ByGrossprofitb/d 14,810

To Discount 1,500 ByDiscount 700ToBadDebts 420ToNetProfittransfertoCapital(b.f.) 4,290

15,510 15,510Balance Sheet of M/s ....as on 31st March, 2017

Liabilities ` ` Assets `

Capital Sundryassets 12,040Openingbalance 26,770 Inventoryintrade 11,120Add:Addition 8,500 Sundrydebtors 17,870NetProfit 4,290 Cashinhand&atbank 8,080

39,560Less:Drawings (3,180) 36,380Sundrycreditors 12,400Outstanding expenses 330

49,110 49,110


14.30 ACCOUNTING

Working Notes:(i) Cash sales

Combined Cash & Bank Account

` `

ToBalanceb/d 6,960 BySundrycreditors 60,270ToSundries(Contra) 5,000 BySundries(Contra) 5,000ToSundries(Contra) 9,240 BySundries(Contra) 9,240ToSundrydebtors 62,500 ByDrawings 3,180ToCapitalA/c 8,500 ByMachinery 430ToSales(CashSales-BalancingFigure) 4,600 BySundryexpenses 9,570

ByPurchases 1,030ByBalancec/d 8,080

96,800 96,800

(ii) Total Debtors Account

` `

ToBalanceb/d 16,530 ByBank 62,500(Balancingfigure) ByDiscount(64,000-62,500) 1,500ToSales(71,810–4,600) 67,210 ByReturnInward 1,450

ByBadDebts 420ByBalancec/d 17,870

83,740 83,740

(iii) Total Creditors Account

` `

ToBank 60,270 ByBalanceb/d 15,770To Discount 700 ByPurchases 58,000To Return Outward 400 (Balancingfigure)ToBalancec/d 12,400

73,770 73,770

(iv) Balance Sheet as on 1st April, 2016


Capital(balancingfigure) 26,770 SundryAssets 11,610SundryCreditors 15,770 InventoryinTrade 8,040



Outstanding Expenses 600 SundryDebtors(fromtotaldebtorsA/c)

16,530

Cashinhand&atbank 6,96043,140 43,140

(v)

`

Expenses paid in Cash 9,570Add:Outstandingon31-3-2017 330

9,900Less:Outstandingon1-4-2016 (600)

9,300

(vi) Duetolackofinformation,depreciationhasnotbeenprovidedonfixedassets.

ILLUSTRATION 8

Mr. Anup runs a wholesale business where in all purchases and sales are made on credit. He furnishes the following closing balances:

31-12-2015 31-12-2016Sundry debtors 70,000 92,000Bills receivable 15,000 6,000Bills payable 12,000 14,000Sundry creditors 40,000 56,000Inventory 1,10,000 1,90,000Bank 90,000 87,000Cash 5,200 5,300

Summary of cash transactions during the year 2016: (i) Deposited to bank after payment of shop expenses @ ` 600 p.m., wages @ `

9,200 p.m. and personal expenses @ ` 1,400 p.m. ` 7,62,750. (ii) Withdrawals ` 1,21,000. (iii) Cash payment to suppliers ` 77,200 for supplies and ` 25,000 for furniture. (iv) Cheques collected from customers but dishonoured ` 5,700. (v) Bills accepted by customers ` 40,000. (vi) Bills endorsed ` 10,000. (vii) Bills discounted ` 20,000, discount ` 750. (viii) Bills matured and duly collected ` 16,000. (ix) Bills accepted ` 24,000.


14.32 ACCOUNTING

(x) Paid suppliers by cheque ` 3,20,000. (xi) Received ` 20,000 on maturity of one LIC policy of the proprietor by cheque. (xii) Rent received ` 14,000 by cheque for the premises owned by proprieter. (xiii) A building was purchased on 30-11-2016 for opening a branch for ` 3,50,000

and some expenses were incurred on this building, details of which are not maintained.

(xiv) Electricity and telephone bills paid by cash ` 18,700, due ` 2,200.Other transactions: (i) Claim against the firm for damage ` 1,55,000 is under legal dispute. Legal

expenses ` 17,000. The firm anticipates defeat in the suit. (ii) Goods returned to suppliers ` 4,200. (iii) Goods returned by customers ` 1,200. (iv) Discount offered by suppliers ` 2,700. (v) Discount offered to the customers ` 2,400. (vi) The business is carried on at the rented premises for an annual rent of ` 20,000

which is outstanding at the year end.Prepare Trading and Profit & Loss Account of Mr. Anup for the year ended 31-12-2016 and Balance Sheet as on that date.

SolutionTrading and Profit & Loss Account of Mr. Anup

for the year ended 31-12-2016` ` ` `

ToOpeningInventory 1,10,000 BySales 9,59,750To Purchases 4,54,100 Less:SalesLess:PurchasesReturn (4,200) 4,49,900 Return (1,200) 9,58,550ToGrossProfit(b.f.) 5,88,650 ByClosing

Inventory1,90,000

11,48,550 11,48,550ToWages(9,200x12) 1,10,400 ByGross 5,88,650

ToElectricity&Tel.Charges(18,700+2,200)

20,900 Profit

To Legal expenses 17,000 ByDiscount 2,700ToDiscount(2,400+750)

3,150

ToShopexp.(600x12) 7,200ToProvisionforclaimsfordamages

1,55,000



To Shop Rent 20,000ToNetProfit(b.f.) 2,57,700

5,91,350 5,91,350Balance-Sheet as on 31-12-2016


CapitalA/c(W.N.vi) 2,38,200 Building(fromsummarycashandbankA/c)

3,72,000

Add:Freshcapital Furniture 25,000introducedMaturityvaluefromLIC 20,000

Inventory 1,90,000

Rent 14,000 Sundrydebtors 92,000Add:NetProfit 2,57,700 Billsreceivable 6,000

5,29,900 CashatBank 87,000Less:Drawing(14,00x12) (16,800) 5,13,100 CashinHand 5,300Rent outstanding 20,000Sundrycreditors 56,000BillsPayable 14,000Outstanding expensesLegal Expenses 17,000Electricity&Telephone charges 2,200 19,200Provision for claims fordamages 1,55,000

7,77,300 7,77,300

Working Notes :

(i) Sundry Debtors Account

` `

ToBalanceb/d 70,000 ByBillReceivableA/c-ToBillreceivableA/c-Bills dishonoured

3,000 Billsacceptedby customers

40,000

ToBankA/c-Cheque dishonoured

5,700 ByBankA/c-

ToCreditsales(Balancing Figure)

9,59,750 Cheque received 5,700


14.34 ACCOUNTING

ByCash(fromsummarycashandbankaccount)

8,97,150

ByReturninwardA/c 1,200ByDiscountA/c 2,400ByBalancec/d 92,000

10,38,450 10,38,450

(ii) Bills Receivable Account

` `

ToBalanceb/d 15,000 BySundrycreditorsA/cToSundryDebtorsA/c(Billsaccepted)

40,000 (Billsendorsed) 10,000

ByBankA/c(20,000–750) 19,250ByDiscountA/c(Billsdiscounted) 750ByBankBillscollectedonmaturity 16,000BySundrydebtorsBillsdishonoured(Bal.Fig) 3,000ByBalancec/d 6,000

55,000 55,000(iii) Sundry Creditors Account

` `

ToBank 3,20,000 ByBalancec/d 40,000To Cash 77,200 ByCreditpurchase

(Balancingfigure) 4,54,100ToBillPayableA/c 24,000ToBillReceivableA/c 10,000ToReturnOutwardA/c 4,200ToDiscountReceivedA/c 2,700ToBalanceb/d 56,000

4,94,100 4,94,100

(iv) Bills Payable A/c

` `

ToBankA/c(Balancefigure) 22,000 ByBalanceb/d 12,000ToBalancec/d 14,000 BySundrycreditorsA/c

Bills accepted 24,00036,000 36,000



(v) Summary Cash and Bank A/c

Cash Bank Cash Bank` ` ` `

ToBalanceb/d 5,200 90,000 ByBank 7,62,750ToSundrydebtors(Bal.Fig)

8,97,150 ByCash 1,21,000

ByShopexp.(600x12) 7,200To Cash 7,62,750 ByWages(9,200x12) 1,10,400ToBank 1,21,000 ByDrawingA/c(1,400

x12)16,800

ByBillsPayable 22,000ToSundayDebtors 5,700 BySundrycreditors 77,200 3,20,000ToBillsreceivable 19,250 ByFurniture 25,000ToBillsreceivable 16,000 BySundryDebtors 5,700ToCapital(maturityvalueofLICpolicy)

20,000 ByElectricity&Tel.Charges

18,700

ToCapital(Rentreceived)

14,000 ByBuilding(Bal.fig) 3,72,000

ByBalancec/d 5,300 87,00010,23,350 9,27,700 10,23,350 9,27,700

(vi) Statement of Affairs as on 31-12-2015


SundryCreditors 40,000 Inventory 1,10,000BillsPayable 12,000 Debtors 70,000Capital(Balancingfigure) 2,38,200 Billsreceivable 15,000

CashatBank 90,000CashinHand 5,200

2,90,200 2,90,200


14.36 ACCOUNTING

ILLUSTRATION 9

Ms. Rashmi furnishes you with the following information relating to her business:

(a) Assets and liabilities as on 1.1.2016 31.12.2016

` `

Furniture(w.d.v) 12,000 12,700Inventoryatcost 16,000 14,000SundryDebtors 32,000 ?SundryCreditors 22,000 30,000Prepaid expenses 1,200 1,400Unpaid expenses 4,000 3,600Cashinhandandatbank 2,400 1,250

(b)Receiptsandpaymentsduring2016: Collections from debtors, after allowing discount of ` 3,000 amounted to

`1,17,000. Collectionsondiscountingofbillsofexchange,afterdeductionofdiscountof

`250bythebank,totalledto`12,250. Creditorsof`80,000werepaid`78,400infullsettlementoftheirdues. Paymentforfreightinwards`6,000. Amountwithdrawnforpersonaluse`14,000. Paymentforofficefurniture`2,000. Investmentcarryingannualinterestof4%werepurchasedat`192(facevalue

`200)on1stJuly,2016andpaymentmadetherefor. Expenses including salaries paid `29,000. Miscellaneous receipts `1,000. (c) Billsofexchangedrawnonandacceptedbycustomersduringtheyearamounted

to `20,000.Ofthese,billsofexchangeof`4,000wereendorsedinfavourofcreditors.Anendorsedbillofexchangeof`800wasdishonoured.

(d) Goodscosting`1,800wereusedasadvertisingmaterials. (e)Goodsareinvariablysoldtoshowagrossprofitof33-1/3%onsales. (f) Differenceincashbook,ifany,istobetreatedasfurtherdrawingorintroduction

ofcapitalbyMs.Rashmi. (g) Provideat2.5%fordoubtfuldebtsonclosingdebtors.Rashmiasksyoutopreparetradingandprofitandlossaccountfortheyearended31stDecember,2016andthebalancesheetasonthatdate.



Solution: Trading and Profit and Loss Account of Ms. Rashmi for the year ended 31st December, 2016

` `

ToOpeningInventory 16,000 BySales(W.N.3) 1,46,100ToPurchases(W.N.2) 91,200 ByClosing

inventory14,000

Less:Foradvertising (1,800) 89,400 To Freight inwards 6,000 ToGrossprofitc/d@33-1/3% 48,700 1,60,100 1,60,100ToSundryexpenses(W.N.6) 28,400 ByGrossprofitb/d 48,700ToAdvertisement 1,800 ByIntereston

ToDiscountallowed:Debtors 3,000investment(200x4/100x½)

4

BillsReceivable 250 3,250 ByDiscountreceived

1,600

ToDepreciationonfurniture(12,000+2,000–12,700)

1,300 ByMiscellaneousincome

1,000

ToProvisionfordoubtfuldebts 972ToNetProfit(b.f.) 15,582 51,304 51,304

Balance Sheet as on 31st December, 2016

Liabilities Amount Assets Amount` ` ` `

Capital as on 1.1.2016(W.N.1)

37,600 Furniture(w.d.v.) Additions during the

12,000

Less:Drawings (15,808) Year 2,000 21,792 Less:Depreciation(b.f.) (1,300) 12,700Add:NetProfit 15,582 37,374 Investment 192Sundrycreditors 30,000 Interestaccrued(200x

4%x6/12)4

Outstanding expenses

3,600 ClosingInventory 14,000


14.38 ACCOUNTING

Sundrydebtors 38,900Less:Provisionfor [email protected]% 972 37,928Billsreceivable(W.N.7) 3,500Cash in hand and at bank

1,250

Prepaid expenses 1,400 70,974 70,974

Working Notes :(1) Capital on 1st January, 2016 Balance Sheet As On 1st January, 2016


Capital(Bal.fig.) 37,600 Furniture(w.d.v.) 12,000Creditors 22,000 Inventoryatcost 16,000Outstanding expenses 4,000 Sundrydebtors 32,000

Cashinhandandatbank 2,400Prepaid expenses 1,200

63,600 63,600(2) Purchases made during the year

Sundry Creditors Account` `

ToCashandbankA/c 78,400 ByBalanceb/d 22,000ToDiscountreceivedA/c(80,000–78,400)

1,600 BySundrydebtorsA/c 800

ToBillsReceivableA/c 4,000 ByPurchasesA/c 91,200ToBalancec/d 30,000 (Balancingfigure)

1,14,000 1,14,000

(3) Sales made during the year

`

Openinginventory 16,000Purchases 91,200Less:Foradvertising (1,800) 89,400Freight inwards 6,000



1,11,400Less:Closinginventory (14,000)Costofgoodssold 97,400Add:Grossprofit(@50%oncost) 48,700

1,46,100

(4) Debtors on 31st December, 2016 Sundry Debtors Account

` `

ToBalanceb/d 32,000 ByCashandbankA/c 1,17,000ToSalesA/c(W.N.3) 1,46,100 ByDiscountallowedA/c 3,000ToSundrycreditorsA/c ByBillsreceivableA/c 20,000(billdishonored) 800 ByBalancec/d(Bal.fig.) 38,900

1,78,900 1,78,900

(5) Additional drawings by Ms. Rashmi Cash and Bank Account

` `

ToBalanceb/d 2,400 ByFreightinwardsA/c 6,000ToSundrydebtorsA/c 1,17,000 ByFurnitureA/c 2,000ToBillsReceivableA/c 12,250 ByInvestmentA/c 192ToMiscellaneousincomeA/c 1,000 ByExpensesA/c 29,000

ByCreditorsA/c 78,400ByDrawingsA/c 15,808

[`14,000+`1,808(b.f.)(Additionaldrawings)]

ByBalancec/d 1,2501,32,650 1,32,650

(6) Amount of expenses debited to Profit and Loss A/c Sundry Expenses Account

` `

ToPrepaidexpensesA/c(on1.1.2016)

1,200 ByOutstandingexpensesA/c(on1.1.2016)

4,000

ToBankA/c 29,000 ByProfitandLossA/c(Balancingfigure)

28,400

ToOutstandingexpensesA/c(on31.12.2016)

3,600 ByPrepaidexpensesA/c 1,400

33,800 33,800


14.40 ACCOUNTING

(7) Bills Receivable on 31st December, 2016 Bills Receivable Account

` `

ToDebtorsA/c 20,000 ByCreditorsA/c 4,000ByBankA/c 12,250ByDiscountonbillsreceivableA/c 250ByBalancec/d(Balancingfigure) 3,500

20,000 20,000

SUMMARY

• Single entry system is generally found in sole trading concerns or even inpartnershipfirmstosomeextentbutneverincaseoflimitedliabilitycompaniesonaccountoflegalrequirements.

• Therearebasically3typesofsingleentrysystems: i. PureSingleEntry ii. SimpleSingleEntry iii. QuasiSingleEntry• Singleentrysystemignorestheconceptofdualityandtherefore,transactionsarenotrecordedintheirtwo-foldaspects.

TEST YOUR KNOWLEDGE

MCQs 1.Incaseofnetworthmethod,profitisdeterminedby (a) Preparingatradingandprofitandlossaccount. (b) Comparingthecapital inthebeginningwiththecapitalattheendofthe

accountingperiod. (c) Comparingthenetassetsinthebeginningwiththenetassetsattheendof

theaccountingperiod. 2. Singleentrysystemcanbefollowedby (a)Smallfirms. (b)Jointstockcompanies. (c)Co-operativesocieties.



3. Closingcapitaliscalculatedas (a)Openingcapital+Additionalcapital-Drawings. (b)Openingcapital+Additionalcapital–Drawings+Profit. (c) Openingcapital+Additionalcapital+Drawings-Profit. 4. Undersingleentrysystem,onlypersonalaccountsarekeptandinsomecases (a)Cashbookismaintained; (b)Fixedassets’accountsaremaintained; (c)Liabilities’accountsaremaintained. 5. TheclosingcapitalofMr.Bason31.3.2016was` 4,00,000. On1.4.2015his

capital was ̀ 3,50,000.Hisnetprofitfortheyearended31.3.2016was̀ 1,00,000.He introduced` 30,000asadditional capital inFebruary,2016. Findout theamountdrawnbyMr.Bforhisdomesticexpenses.

(a)` 1,00,000; (b)` 80,000; (c) ` 1,20,000;

Theoretical Questions1. WhatismeantbySingleentrySystem?Whatarethetypesofproceduresadopted

forthissystem?

Practical QuestionsQUESTION 1A company sold 20%of the goods on cash basis and the balance on credit basis.Debtorsareallowed1½month’screditandtheirbalanceason31.03.2016is̀ 1,25,000.Assumethatthesaleisuniformthroughouttheyear.Calculatethecreditsalesandtotalsalesofthecompanyfortheyearended31.03.2016.QUESTION 2The following is the Balance Sheet of the retail business of Sri Srinivas as at 31stDecember,2015:


SriSrinivas’scapital 1,00,000 Furniture 10,000Liabilitiesforgoods 20,500 Stock 70,000Rent 1,000 Debtors 25,000

Cashatbank 14,500Cash in hand 2,000

1,21,500 1,21,500


14.42 ACCOUNTING

Youarefurnishedwiththefollowinginformation: (1) SriSrinivassellshisgoodsataprofitof20%onsales. (2) Goodsaresoldforcashandcredit.Creditcustomerspaybychequesonly. (3) Paymentsforpurchasesarealwaysmadebycheques. (4) ItisthepracticeofSriSrinivastosendtothebankeveryweekendthecollectionsof

theweekafterpayingeveryweek,salaryof̀ 300totheclerk,Sundryexpensesof ` 50andpersonalexpenses` 100.

Analysis of the Bank Pass–Book for the 13weeks period ending 31stMarch, 2016disclosedthefollowing:

`

Paymentstocreditors 75,000Paymentsofrentupto31.3.2016 4,000Amountsdepositedintothebank 1,25,000(include` 30,000receivedfromdebtorsbycheques)Thefollowingarethebalanceson31stMarch,2016: `

Stock 40,000Debtors 30,000Creditorsforgoods 36,500

Ontheeveningof31stMarch,2016theCashierabscondedwiththeavailablecashinthecashbox.Therewasnocashdepositintheweekendedonthatdate.YouarerequiredtoprepareastatementshowingtheamountofcashdefalcatedbytheCashierandalsoaProfitandLossAccountfortheperiodended31stMarch,2016andaBalanceSheetasonthatdate.QUESTION 3Mr.Arunsabusinessofreadymadegarments.Heclosesthebooksofaccountson31stMarch.TheBalanceSheetason31stMarch,2016wasasfollows:


A’scapitala/c 4,04,000 Furniture 40,000Creditors 82,000 Stock 2,80,000

Debtors 1,00,000Cash in hand 28,000Cashatbank 38,000

4,86,000 4,86,000

Youarefurnishedwiththefollowinginformation: (1) Hissales,fortheyearended31stMarch,2017were20%higherthanthesalesof

previousyear,outofwhich20%saleswascashsales. Totalsalesduringtheyear2015-16were` 5,00,000.



(2) Paymentsforallthepurchasesweremadebychequesonly. (3) Goodsweresoldforcashandcreditboth.Creditcustomerspaybechequesonly. (4) Deprecitiononfurnitureistobecharged10%p.a. (5)Mr.Asenttothebankthecollectionofthemonthatthelastdateoftheeach

monthafterpayingsalaryof`2,000 to theclerk,officeexpenses`1,200andpersonal expenses `500.

Analysisofbankpassbookfortheyearending31stMarch2017disclosedthefollowing:

`

Paymenttocreditors 3,00,000Paymentofrentupto31stMarch,2017 16,000Cashdepositedintothebankduringtheyear 80,000

Thefollowingarethebalanceson31stMarch,2017:

`

Stock 1,60,000Debtors 1,20,000Creditorsforgoods 1,46,000Ontheeveningof31stMarch2017,thecashierabscondedwiththeavailablecashinthecashbook.YouarerequiredtoprepareTradingandProfitandLossA/cfortheyearended31stMarch,2017andBalanceSheetasonthatdate.Alltheworkingsshouldformpartoftheanswer.QUESTION 4Atraderkeepshisbooksofaccountundersingleentrysystem.On31stMarch,2015hisstatementofaffairsstoodasfollows:

Liabilities ` Assets ` Trade Creditors 5,80,000 Furniture,FixturesandFittings 1,00,000BillsPayable 1,25,000 Stock 6,10,000Outstanding Expenses 45,000 TradeDebtors 1,48,000Capital Account 2,50,000 BillsReceivable 60,000

Unexpired Insurance 2,000CashinHandandatBank 80,000

10,00,000 10,00,000


14.44 ACCOUNTING

ThefollowingwasthesummaryofCash–bookfortheyearended31stMarch,2016:

Receipts ` Payments ` CashinHandandatBankon1stApril,2016

PaymentstoTradeCreditors

75,07,000

80,000 PaymentsforBillspayable 8,15,000Cash Sales 73,80,000 SundryExpensespaid 6,20,700ReceiptsfromTradeDebtors 15,10,000 Drawings 2,40,000ReceiptsforBillsReceivable 3,40,000 CashinHandandatBank

on31stMarch,2016 1,27,30093,10,000 93,10,000

Discount allowed to trade debtors and received from trade creditors amounted to `36,000and`28,000respectively.Billsendorsedamountedto`15,000.AnnualFireInsurancepremiumof`6,000waspaideveryyearon1stAugustfortherenewalofthepolicy.Furniture,fixturesandfittingsweresubjecttodepreciation@15%perannumondiminishingbalancesmethod.Youarealsoinformedaboutthefollowingbalancesason31stMarch,2016:

`

Stock 6,50,000TradeDebtors 1,52,000BillsReceivable 75,000BillsPayable 1,40,000Outstanding Expenses 5,000

Thetradermaintainsasteadygrossprofitratioof10%onsales.

PrepareTradingandProfitandLossAccountfortheyearended31stMarch,2016andBalanceSheetasatthatdate.QUESTION 5

ThefollowingistheBalanceSheetofaconcernon31stMarch,2015:

` `

Capital 10,00,000 Fixed Assets 4,00,000Creditors(Trade) 1,40,000 Stock 3,00,000Profit&LossA/c 60,000 Debtors 1,50,000

Cash&Bank 3,50,000



12,00,000 12,00,000

Themanagementestimatesthepurchasesandsalesfortheyearended31stMarch,2016asunder:

upto 28.2.2016 ` March 2016 ` Purchases 14,10,000 1,10,000Sales 19,20,000 2,00,000

It was decided to invest `1,00,000inpurchasesoffixedassets,whicharedepreciated@10%oncost.

ThetimelagforpaymenttoTradeCreditorsforpurchaseandreceiptfromSalesisonemonth.Thebusinessearnsagrossprofitof30%onturnover.Theexpensesagainstgrossprofitamountto10%oftheturnover.Theamountofdepreciationisnotincludedintheseexpenses.

Draft aBalanceSheet as at 31stMarch, 2016assuming that creditors are all TradeCreditors forpurchasesanddebtors for salesand there isnoother itemofcurrentassetsand liabilitiesapart fromstockandcashandbankbalances.Assume thatallsalesandpurchasesareoncreditbasis.

ANSWERS/ HINTSMCQs

1. (b) 2. (a) 3. (b) 4. (a) 5. (b)

Theoretical Questions1.Singleentrysystemisaninaccurateandunsystematicmethodofrecordingbusinesstransactions.Theproceduresadoptedare:Puresingleentry;SimpleentryandQueasysingleentry.Fordetails,ReferPara1and2ofthechapter.Solutions to the Practical questionsAnswer 1 CalculationofCreditSalesandTotalsales

CreditSalesfortheyearended2015-16=Debtors× 1.5months12months

= ` 1,25,000× 1.5months12months

= `10,00,000


14.46 ACCOUNTING

Totalsalesfortheyearended2015-16 =Creditsalesx 80%100%

= `10,00,000x 80%100%

= `12,50,000Answer 2

Statement showing the amount of cash defalcated by the Cashier

` `

Cashbalanceason1.1.2016Add:Cashsales(W.N.2andW.N.4)Less:Salarytoclerk(`300×13)Sundryexpenses(`50×13)DrawingsofSriSrinivas(`100×13)Depositintobank(`1,25,000–̀ 30,000)Cashbalanceason31.3.2016(defalcatedbycashier)

2,0001,16,2503,900650

1,30095,000

1,18,250

(1,00,850)17,400

Trading and Profit and Loss Account of Sri Srinivasfor the 13 week period ended 31st March, 2016

` ` `

ToOpeningstockTo PurchasesToGrossProfitc/d

ToSalaries(300x13)ToRent(̀ 4,000–̀ 1,000)ToSundryExpenses(50x13)ToLossofcashbytheftToNetProfit(b.f.)

70,00091,00030,250

191,2503,9003,000650

17,4005,30030,250

BySales:Cash(W.N.2&W.N.4)Credit(W.N.3)ByClosingstock

ByGrossprofitb/d

1,16,250

35,000 1,51,25040,000

1,91,25030,250

30,250



Balance Sheet of Sri Srinivasas on 31st March, 2016


Capitalason1.1.2016Add:Profit

Less:DrawingsLiabilitiesforgoods

1,00,0005,300

1,05,300 (1,300) 1,04,000

36,5001,40,500

FurnitureStockDebtorsCashatbank

10,00040,00030,00060,500

1,40,500

Working Notes 1. Purchases

Creditors Account` `

ToBankA/cToBalancec/d

75,00036,500

1,11,500

ByBalanceb/dByPurchasesA/c(Bal.fig.)

20,50091,000

1,11,500

2. Total sales

`

Opening StockAdd:Purchases

Less:ClosingstockCost of Goods SoldAdd:Grossprofit@25%oncostTotal Sales

70,00091,000

1,61,000(40,000)1,21,00030,250

1,51,250


14.48 ACCOUNTING

3. Credit Sales

Debtors Account

` `

ToBalanceb/dToSalesA/c(Bal.fig.)

25,00035,00060,000

ByBankA/cByBalancec/d

30,00030,00060,000

4. Cash Sales

`

Total salesLess:CreditSalesCash sales

1,51,250(35,000)1,16,250

5. Bank balance as on 31.3.2016

` `

ToBalanceb/dToDebtorsA/cToCashA/c(1,25,000–30,000)

14,50030,00095,000

1,39,500

ByCreditorsA/cByRentA/cByBalancec/d(b.f.)

75,0004,00060,500

1,39,500

Notes : 1. Allpurchasesaretakenoncreditbasis. 2. Intheabsenceofinformationabouttherateofdepreciation,nodepreciationhas

beenchargedonfurniture. 3. Theamountdefalcatedbythecashiermaybetreatedasrecoverablefromhim.

Inthatcase,`17,400maybeshownassundryadvancesonassetssideintheBalanceSheetandnetprofit for the13weekperiodending31stMarch,2016wouldamount`22,700.



Answer 3Trading and Profit and Loss Account for the year ending 31st March 2016

Particulars ` Particulars `

ToOpeningstockToPurchases(W.N.1)ToGrossprofit(b.f.)

ToSalary(2,000x12)To RentToOfficeexpenses(1,200x12)ToLossofcash(W.N.6)ToDepreciationonfurnitureToNetProfit(b.f.)

2,80,0003,64,0001,16,000

7,60,00024,00016,00014,40023,6004,00034,000

1,16,000

BySales(W.N.3) Credit 4,80,000 Cash 1,20,000ByClosingstock

ByGrossprofit

6,00,0001,60,0007,60,0001,16,000

1,16,000

Balance Sheet as on 31st March, 2016Liabilities ` Assets `

A’sCapital 4,04,000Add:NetProfit 34,000Less:Drawings(500x12)(6,000)Creditors

4,32,0001,46,000

5,78,000

Furniture 40,000Less:Depreciation (4,000)StockDebtorsCashatbank

36,0001,60,0001,20,0002,62,0005,78,000

Working Notes 1. Calculation of purchases

Creditors AccountParticulars ` Particulars `

ToBankA/cToBalancec/d

3,00,0001,46,0004,46,000

ByBalanceb/dByPurchasesA/c(Bal.fig.)

82,0003,64,0004,46,000


14.50 ACCOUNTING

2. Calculation of total sales

`

Salesfortheyear2015-16Add:20%increaseTotalsalesfortheyear2016-17

5,00,0001,00,0006,00,000

3. Calculation of credit sales

`

Total salesLess:Cashsales(20%oftotalsales)

6,00,000(1,20,000)4,80,000

4. Calculation of cash collected from debtorsDebtors Account


ToBalanceb/dToSalesA/c

1,00,0004,80,0005,80,000

ByBankA/c(Bal.fig.)ByBalancec/d

4,60,0001,20,0005,80,000

5. Calculation of closing balance of cash at bankBank Account


ToBalanceb/dToDebtorsA/cToCashA/c

38,0004,60,00080,000

5,78,000

ByCreditorsA/cByRentA/cByBalancec/d(b.f.)

3,00,00016,000

2,62,0005,78,000

6. Calculation of amount of cash defalcated by the cashier` `

Cashbalanceason1stApril2016Add: Cashsalesduringtheyear

Less: Salary(` 2,000x12) Officeexpenses(̀ 1,200x12) DrawingsofA(̀ 500x12) CashdepositedintobankduringtheyearCashbalanceason31stMarch2017(defalcatedbythecashier)

24,00014,4006,00080,000

28,0001,20,0001,48,000

(1,24,400)23,600



Answer 4Trading and Profit and Loss Accountfor the year ended 31st March, 2017


To To To

To To To

To

OpeningStockPurchases(W.N.3)Grossprofitc/d(10%of93,00,000)

Sundryexpenses(W.N.6)Discount allowedDepreciation(15%̀ 1,00,000)NetProfit(b.f.)

6,10,00084,10,0009,30,000

99,50,0005,80,70036,00015,000

3,26,3009,58,000

BySales CashCredit(W.N.2)ByClosingstock

ByGrossprofitb/dByDiscountreceived

73,80,00019,20,000

93,00,0006,50,00099,50,0009,30,00028,000

9,58,000

Balance Sheet as at 31st March, 2016

Liabilities Amount Assets Amount ` `

Capital Furniture&Fittings 1,00,000 Openingbalance 2,50,000 Less:Depreciation (15,000) 85,000 Less:Drawing (2,40,000) Stock 6,50,000 10,000 TradeDebtors 1,52,000 Add:Netprofitfortheyears 3,26,300 3,36,300 Billsreceivable 75,000 Billspayable 1,40,000 Unexpiredinsurance 2,000 Tradecreditors 6,10,000 Cashinhand&atbank 1,27,300 Outstandingexpenses 5,000 10,91,300 10,91,300

Working Notes 1. Bills Receivable Account

` `

ToBalanceb/d 60,000 ByCash 3,40,000 ToTradedebtors(b.f.) 3,70,000 ByTradecreditors 15,000 (Billsendorsed) ByBalancec/d 75,000 4,30,000 4,30,000


14.52 ACCOUNTING

2. Trade Debtors Account

` `

ToBalanceb/d 1,48,000 ByCash/Bank 15,10,000 ToCreditsales 19,20,000 ByDiscountallowed 36,000 (Bal.fig.) ByBillsreceivable 3,70,000 ByBalancec/d 1,52,000 20,68,000 20,68,000

3. Memorandum Trading Account

` `

ToOpeningstock 6,10,000 BySales 93,00,000 ToPurchases(Balancingfigure) 84,10,000 ByClosingstock 6,50,000 ToGrossProfit(10%onsales) 9,30,000 99,50,000 99,50,000

4. Bills Payable Account

` `

ToCash/Bank 8,15,000 ByBalanceb/d 1,25,000 ToBalancec/d 1,40,000 ByCreditors(balancingfigure) 8,30,000 9,55,000 9,55,000

5. Trade Creditors Account

` `

ToCash/Bank 75,07,000 ByBalanceb/d 5,80,000 ToDiscountreceived 28,000 ByPurchases(ascalculated 84,10,000 ToBillsreceivable 15,000 inW.N.3) ToBillspayable 8,30,000 ToBalancec/d(balancingfigure) 6,10,000 89,90,000 89,90,000



6. Computation of sundry expenses to be charged to Profit & Loss A/c`

Sundryexpensespaid(aspercashbook)Add:Prepaidexpensesason31–3–2015

Less:Outstandingexpensesason31–3–2015

Add:Outstandingexpensesason31–3–2016

Less:Prepaidexpensesason31–3–2016(InsurancepaidtillJuly,2016)(6,000x4/12)

6,20,7002,000

6,22,700(45,000)5,77,7005,000

5,82,700(2,000)

5,80,700

Answer 5Projected Balance Sheet of ......

as on 31st March, 2016


Capital 10,00,000 FixedAssets 4,00,000 Profit&LossAccountason Additions 1,00,000 1stApril,2015 60,000 5,00,000 Add:Profitfortheyear 3,74,000 4,34,000 Less:Depreciation@10% (50,000) 4,50,000 Creditors(Trade) 1,10,000 Stockintrade 3,36,000 SundryDebtors 2,00,000 Cash&BankBalances(workingnote) 5,58,000 15,44,000 15,44,000

Working Notes 1. Projected Trading and Profit and Loss Account

for the year ended 31st March, 2016


ToOpeningStockTo PurchasesToGrossProfitc/d(30%onsales)

ToSundryExpenses(10%onsales)To DepreciationToNetProfit(b.f.)

3,00,00015,20,0006,36,00024,56,0002,12,00050,000

3,74,0006,36,000

BySalesByClosingStock(balancingfigure)

ByGrossProfitb/d

21,20,0003,36,000

24,56,0006,36,000

6,36,000


14.54 ACCOUNTING

2. Cash and Bank Account1st April, 2015 to 31st March, 2016


To To

Balanceb/dSundryDebtors(`1,50,000+̀ 19,20,000)

3,50,00020,70,000

24,20,000

BySundryCreditors(`1,40,000+̀ 14,10,000)ByExpensesByFixedAssetsByBalancec/d(b.f.)

15,50,000

2,12,0001,00,0005,58,00024,20,000


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