accounts from incomplete records Test - 4

calculation of profit/(loss) during the year:-

       capital at the end                                   ****

     Add: drawing during the year                         ****

                                                                            ****

     Less: capital introduced                                  **** 

    adjusted capital at the end                                ****

    Less: capital at the beginning                           ****  

   profit\loss for the year                                       ****

statement of affairs=a statement of affairs is a statement of all assets and liabilities. The difference between the amount of the two sides is taken as capital. A statement of affairs is just like the balance sheet.

following are the features of single entry system:-

1. this system is suitable for sole trader or partnerships firm.

2. this system may differ from firm to firm.

3. under this system only personal accounts are prepared.

4. generally, a cash book is maintained in this system which mixes up business as well as private transactions.

NET WORTH= total assets- liabilities

bad debts mean is the amount that has become irrecoverable from the debtor. hence bad debts affects(decrease) the debtor.

calculation of profit/(loss) during the year:-

capital at the end                   1000

Add: drawing during the year 200(B/F)

adjusted capital at the end    1200

Less: capital at the beginning  (500)

profit\loss for the year              700

'accounts from incomplete records system' sometimes for certain transaction both aspects are recorded, for others one aspects are recorded and some transactions are not even recorded. hence, final accounts cannot be prepared therefore this system of accounting is not reliable because

The Commission received in advance is a liability for business hence it will be shown as liability side of the statement of affairs.

since the books under the single entry system are prepared from incomplete records hence it does not reflect actual position rather it reflects an estimated position.

a limited company, because of legal restriction, cannot maintain accounting books on single entry system. legal restrictions such as Companies Act,2013 and income tax Act,1961 restricts limited companies to maintain accounting books on single entry system.