Accounts from Incomplete Record Test - 4

the closing balance in the cash book at the end of the year shall be the cash in hand at the end of the year.

under this method profit\loss is calculated in the following manner:-

            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                                     ****

  if opening and 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.

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.

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.

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.

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 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.

under accounts from incomplete records system usually only cash and personal accounts of creditors and debtors are maintained, real and nominal accounts are avoided.

the trial balance is prepared just to check the arithmetic accuracy of accounting information. statement of affairs is prepared under accounts from incomplete records where arithmetic accuracy can't be checked since all information aren't available. hence when Statement of affairs is prepared trial balance is not prepared.

a balance sheet is based on the balances of different ledger accounts.

single entry system also known as "accounts from incomplete records" under this system sometimes for certain transaction both aspects are recorded, for others one aspects are recorded and some transactions are not even recorded. this is an incomplete and an unscientific system.

if credit sale is not given in any question, it can be ascertained by preparing debtor A/C. the balancing figure in the debtor A/C WOULD be considered as credit sale.

other entities, like a company can't prepare their books of accounts under this system since they are bound to follow the formats prescribed under Companies Act, 2013.

under 'double entry system' both aspects of a transaction are recorded and also it is a scientific system where as in '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. therefore it creates a lot of difference between the 'balance sheet' and 'statement of affairs'.

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                                       ****

in the above format if the drawing isn't given and no further capital has been introduced, in such a case, the difference will be profit.

an organisation can record, as per their need, both aspects of a transaction or one aspect of a transaction or they may even ignore the transaction. since single entry system doesn't follow any set of rules and principles.

single entry system is mostly used by the small businesses who can not afford heavy book keeping expenditure also it is a very easy method of recording business transactions because no specific knowledge is required for it.