Accounts from Incomplete Record Test - 2

under "accounting from incomplete records" sometimes for certain transactions both aspects are is recorded, for others only one aspect is recorded and some transactions are not even recorded.

calculation of opening capital-

 Closing capital        -        Rs.3000

less:  Fresh capital   -       Rs.400

less: Profit          -           Rs.500

add: drawing         -          Rs.600

opening capital       -         Rs.2700

Opening capital      -      Rs.8000  

add: Profit          -      Rs.900

add: Fresh capital   -     Rs.1000

less: Withdrawn      -      Rs.1200

capital at the end   -     Rs.8700

small size businesses don't want to pay attention in accounting complexities and that's why they don't maintain their books of accounts through the complex system of double entry. since, double entry system a costly system in comparison to incomplete records( single entry), it is a time-consuming system and a small businessman wants to pay his all attention to his business activities rather than accounting activities and also it requires expert knowledge.

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.

under single entry system, trial balance can not be prepared due to the incomplete system of accounting. therefore, the arithmetic accuracy of the accounting can't be verified.

if capital account is shown on the assets side of balance sheet then it means proprietor/partner has withdrawn in excess of the amount which he has invested.

if credit purchase isn't given in any question and it is required to be calculated then it can be calculated by preparing creditors A/C.

sometimes for certain transactions, both aspects are recorded, for others one aspects are recorded and some transactions are not even recorded. that's why it is called as un-scientific system of accounting.

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.