Accounts from Incomplete Record Test - 5

NET WORTH = total assets - liabilities

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

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

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.

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.

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

calculation of opening capital-

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if capital account is shown on the assets side of balance sheet then it means proprietor/partner has withdrawn in excess of the amount which he has invested.

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.

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

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

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

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.

'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

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.

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

drawing= 4,00,000+(15,000*12)+(8,000*12)+(6,000*4)=7,00,000

calculation of profit

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

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.

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

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

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.