accounts from incomplete records Test - 5

as per money measurement principle, only those transactions and events shall be recorded that can be measured in monetary terms.

single entry system is suitable for small businesses because they neither want to engage in the complexities of double entry system nor they have enough money to install a double entry system of accounting. 

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                                       ****

hence for the computation of profit drawing and further capital brought in should be adjusted in the opening and closing capital of the business.

if capital at the beginning is more than capital at the end it means the business has suffered loss.

 If the opening or closing capitals aren't given, statement of affairs needs to be prepared to calculate capitals. 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.

the profit/loss in case of single entry system can be ascertained by the following two methods:-

1. statement of affairs method and

2. conversion method

if capital account is shown on the assets side of balance sheet then it means proprietor/partner has withdrawn in excess of the amount which he has invested.

the debit side of cash book shows the receipt of cash and cash can be received from cash sales, capital introduced or sundry income.

balance sheet consists only real and personal accounts and nominal accounts are dealt in Trading A/C and Profit & Loss A/C.

double entry system = under 'double entry system' both aspects of a transaction are recorded and also it is a scientific system
single entry system = '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.
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.
balance sheet = it merely shows the position of assets and liabilities of a business on a particular date.