Accounts from Incomplete

Records – Single Entry System

Module I of IV
1

CA. S.S. Prathap

Agenda - Module 1

 Understand what is
 Single Entry System or
 Accounts from Incomplete Accounts

 Statement of Affairs
 Debtors & Creditors Velocity

2
Accounts from Incomplete Records
 Revise Basic Concepts
 Provides Strong Foundation

 Forms Foundation for entire Accounting

 Detective Work
 Finding Missing Data using T Accounts
 Using Relationship Between
 Cost, Profit & Sales
 Debtors and Creditors Velocity
 Statement of Affairs

3
Statement of Affairs

Opening Capital
+
Additional Capital
-
Drawings
+
Profits
=
Closing Capital
4
 Illustration I
5 On Statement of Affairs
Illustration 1: Problem Statement

1. The Closing Capital of Mr. Vishnu on 31.03.2007

was D.1,50,000. On 01.04.2006 his capital was
D.60,000. During the year he had drawn D.40,000
for domestic expenses. He introduced D.25,000 as
additional capital in feb.2007. Find out Net Profit for the
year.
(November, 2007).

6
Solution of Illus.1 :
Statement of affairs of Mr. Vishnu
Opening capital = 60,000
Capital introduced = 25,000
Drawings = (40,000)
Profits = x
Closing capital = 1,50,000

Solution :

1,50,000 = 60,000 + 25,000 – 40,000 + x

1,50,000 = 85,000 – 40,000 + x
x = 1,50,000 – 45,000
Profit = 1,05,000
PROFIT FOR THE YEAR 06-07 = 1,05,000 7
 Illustration II
8 On Statement of Affairs
Illustration – II on
Statement of Affairs

2. Find out the Profit of Mr. Adwait from the following

information :

Capital at the beginning of the year D.20,00,000

Drawings made by Mr. A D.2,00,000
Capital at the end of the year D.25,00,000
Additional Capital introduced D.1,00,000
during the year
(November, 2009)
9
Solution to Illustration 2 :
Statement of affairs of Mr. Adwait
Opening capital = 20,00,000
Capital introduced = 1,00,000
Drawings = (2,00,000)
Profits = x
Closing capital = 25,00,000

Solution :

25,00,000 = 20,00,000 + 1,00,000 – 2,00,000 + x

25,00,000 = 21,00,000 – 2,00,000 + x
x = 25,00,000 – 19,00,000
Profit = 6,00,000
PROFIT FOR THE YEAR 08-09 = 6,00,000 10
 Illustration III
11 Provisioning
Illustration – III on Provisioning

3. In a concern, the opening Provision for Doubtful

Debts is D.51,000. During the year a sum of
D.10,000 was Written off as Bad Debt. The closing
balance of Sundry Debtors amounts to D.6,30,000.
It was decided that 10% Of the Debtors is to be
maintained as Provision. Calculate the Closing
Balance towards Provision for Doubtful Debts.
And pass Journal Entry for giving effect to the
Provision maintained.
12
(May, 2008)
Solution to Illus.3 :
Provision for bad & doubtful debts = 51,000
Bad debts = 10,000
Sundry debtors = 6,30,000
10% provision = 63,000

Provision for bad and doubtful debts A/c

To Bad Debts 10,000 By opening bal 51,000

To bal c/d 63,000 By Profit&Loss 22,000

73,000 73,000 13
Journal Entries in the books of ABC Ltd
Bad debts A/c Dr. 10,000
To Sundry debtors A/c 10,000

Prov. for Bad & D.Debts A/c Dr. 10,000

To Bad debts A/c 10,000

Profit & Loss A/c Dr. 22,000

To Prov. for Bad & D.Debts A/c 22,000

14
 Cost, Profit & Sales
Relationship
15 An Intro.
Cost, Profit & Sale Relationship
Let us consider the following :
Cost = 100
Profit = 20
Sale = 120

Now,
Profit with respect to Cost = Profit / Cost
= 20/100 = 1/5 on C
Profit with respect to Sales = Profit / Sales
= 20/120 = 1/6 on S
(i.e.,)1/5 C = 1/6 S 16
Example for Relationship between
Cost, Profit & Sales
Cost = 90
Profit = 30
Sales = 120

Now,
Profit / Cost = 30 / 90 = 1/3 C
Profit / Sales = 30/120 = 1/4S
(i.e.,) 1/3 C = 1/4 S

The Relationship is, “For Sales it will be always one digit

17
more in the denominator ”
 Illustration IV
18 Cost, Profit & Sales Relationship
Illustration IV Relationship of Cost,
Profit & Sales

4. A trader purchased goods for D.1,70,000. The

opening stock of inventory prior to the said
purchase was D.30,000. His sale was D.2,10,000.
Find out the closing stock of inventory if the
gross profit margin is 25 % on Cost.
(November 2009 4 Marks)

19
Solution to Illus.4 :

1/4 Cost = 1/5 Sales

= 1/5 * 2,10,000
= 42,000
Trading A/c
Opening stock 30,000 Sales 2,10,000
Purchases 1,70,000 Closing stock 32,000
Profit 42,000

2,42,000 2,42,000

Closing stock of Mr. A= 32,000

20
 Debtors & Creditors Velocity
21 An Intro.
Debtors Velocity
Also called as Debtors turnover, collection period.

Annual credit sale = 24,00,000

Closing debtors = 4,00,000
Debtor velocity = ?

24 lacs 12 months
4 lacs ?

4* 12
24 = 2 months
Debtors velocity = 2 months 22
Creditor’s velocity
Creditor Velocity = 1 month
Closing Creditors = 50,000
ACP = ?

1 50,000
12 ?

50,000 * 12 = 6,00,000
1
ACP = 6,00,000 23
 Illustration V
24 Debtors Velocity
Illustration V on Debtors Velocity

5. A company sold 25% of the goods on cash basis

and the balance on credit basis. Debtors are
allowed 2 months Credit and their balance as on
31.03.2008 is D.1,40,000. Assume that the sale is
uniform through out the year. Calculate the total
sales of the company for the year ended
31.3.2008.
(May 2008)

25
Solution to Illus.5:
Sundry Debtors = 2 months
Closing debtors = 1,40,000
ACS = 1,40,000 * 12
2
= 8,40,000
ACS = 8,40,000
Total sales = cash sales + credit sales
100 % = 25 % + 75 %
= x + 8,40,000
= 2,80,000 + 8,40,000 26
= 11,20,000
Total Sales = 11,20,000
Summary

In this module, we studied

 Basic concepts of Single Entry System

 Statement of Affairs
 Provisioning
 Relationship between Cost, Profit & Sale
 Debtors and Creditors Velocity

We do hope that you would be better prepared to

answer questions on this module for your
27
forthcoming examinations
 Thank You
28 Do keep moving forward ………