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ACCOUNTS FROM INCOMPLETE RECORDS
LEARNING OUTCOMES
After studying this chapter, you will be able to :
r Learnhowtoderivecapitalsattwodifferentpointsoftimethroughstatementofaffairs;
r Learn the technique of determining profit by comparingcapitalattwodifferentpointsoftime;
r Prepare trading and profit and loss account and balancesheetfromincompleterecords.
14CHAPTER
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14.2 ACCOUNTING
CHAPTER OVERVIEW
Typesofsingleentrysystem
Puresingleentry Simplesingleentry Quasisingleentry
• Singleentrysystemisgenerallyfoundinsoletradingconcernsorpartnershipfirms.• Singleentrysystemignorestheconceptofdualityandtherefore,transactionsare
notrecordedintheirtwo-foldaspects.
Onlypersonalaccounts are maintained
Personal accounts andcashbookare
maintained
Personalaccounts,cashbookandsubsidiarybooksaremaintained
General Techniques
Fresh Investmentbyproprietors or
partners
Distinction between
Business Expenses and Drawings
DerivationofInformationfrom
CashBook
Techniques ofobtainingcomplete
accounting information
AnalysisofSales Ledger and Purchase
Ledger
© The Institute of Chartered Accountants of India
ACCOUNTS FROM INCOMPLETE RECORDS 14.3
1. INTRODUCTION
Veryoftensmallsoleproprietorshipandpartnershipbusinessesdonotmaintaindoubleentrybookkeepingsystem.Sometimestheykeeprecordofthecashtransactionsandcredittransactionsonly.Sometimestheydonotmaintainrecordsofalltransactions.Butattheendoftheaccountingperiodtheywanttoknowtheperformanceandfinancialpositionoftheirbusinesses.Thiscreatessomespecialproblemstotheaccountants.Thischapterdiscusseshowtocompletetheaccountsfromavailableincompleterecords.
Theterm“SingleEntrySystem”ispopularlyusedtodescribetheproblemsofaccountsfrom incomplete records. In practice, the quack accountants follow some hybridmethods.Forsometransactionstheycompletedoubleentries.Forsomeotherstheyjustmaintainoneentry.Stillforsomeothers,theyevendonotpassanyentry.Briefly,thismaybestatedasincompleterecords.Thetaskoftheaccountantistoestablishlinkageamongtheavailableinformationandtofinalisetheaccounts.
Features
• Itisaninaccurate,unscientificandunsystematicmethodofrecordingbusinesstransactions.
• Thereisgenerallynorecordofrealandpersonalaccountsand, inmostofthecases;arecordiskeptforcashtransactionsandpersonalaccounts.
• Cashbookmixesupbusinessandpersonaltransactionsoftheowners.
• Thereisnouniformityinmaintainingtherecordsandthesystemmaydifferfromfirmtofirmdependingontherequirementsandconvenienceofeachfirm.
• Profitunderthissystemisonlyanestimatebasedonavailableinformationandthereforetrueandcorrectprofitscannotbedetermined.Thesame is thecasewiththefinancialpositionintheabsenceofaproperbalancesheet.
2. TYPES
A scrutiny ofmany procedures adopted inmaintaining records under single entrysystembringsforththeexistenceoffollowingthreetypes:
(i) Pure single entry:Inthis,onlypersonalaccountsaremaintainedwiththeresultthatno information is available in respectof cash andbankbalances, salesandpurchases,etc.Inviewofitsfailuretoprovideeventhebasicinformationregarding cash etc., thismethod exists only on paper and has no practicalapplication.
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14.4 ACCOUNTING
(ii) Simple single entry: In this,only: (a)personalaccounts,and (b)cashbookaremaintained.Althoughtheseaccountsarekeptonthebasisofdoubleentrysystem,postingsfromcashbookaremadeonlytopersonalaccountsandnootheraccountistobefoundintheledger.Cashreceivedfromdebtorsorcashpaidtocreditorsissimplynotedonthebillsissuedorreceivedasthecasemaybe.
(iii) Quasi single entry: Inthis:(a)personalaccounts,(b)cashbook,and(c)somesubsidiarybooksaremaintained.Themainsubsidiarybookskeptunderthissystem are Sales book, Purchases book and Bills book.No separate recordismaintainedfordiscounts,whichareenteredintothepersonalaccounts.Inaddition,somescatteredinformationisalsoavailableinrespectoffewimportantitemsofexpenseslikewages,rent,rates,etc.Infact,thisisthemethodwhichisgenerallyadoptedasasubstitutefordoubleentrysystem.
3. ASCERTAINMENT OF PROFIT BY CAPITAL COMPARISONThismethodisalsoknownasNet Worth method or Statement of Affairs Method.
Closing Capital – Opening Capital = ProfitIf detailed information regarding revenue and expenses is not known, it becomesdifficult toprepareprofitand lossaccount. Insteadbycollecting informationaboutassetsandliabilities,itiseasiertopreparebalancesheetattwodifferentpointsoftime.So,whilepreparingaccountsfromincompleterecords,ifsufficientinformationisnotavailable,itisbettertofollowthemethodofcapitalcomparisontoarriveattheprofitfigure.
3.1 Methods of Capital ComparisonCapitalisincreasedifthereisprofit,whilecapitalisreducedifthereisloss.However,iftheproprietor/partnersmadefreshinvestmentsinthebusiness,capitalisincreased;iftheymakewithdrawalcapitalisreduced.Sowhiledeterminingtheprofitbycapitalcomparison,thefollowingrulesshouldbefollowed.
Particulars `
Capital at the end (a) …. Add:Drawings .... Less:Freshcapitalintroduced .....Capital at the beginning (b) .....Profit (a-b) .....
It is clear from theabovediscussion that to follow the capital comparisonmethodoneshouldknowtheopeningcapitalandclosingcapital.Thisshouldbedeterminedbypreparingstatementofaffairsatthetworespectivepointsoftime.Capitalalwaysequalsassetsminusliabilities.
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ACCOUNTS FROM INCOMPLETE RECORDS 14.5
Thuspreparationofstatementofaffairswillrequirelistingupofassetsandliabilitiesandtheiramount. Theaccountantutilisesthefollowingsourcesforthepurposeoffindingouttheassetsandliabilitiesofabusinessenterprise: (i) Cashbookforcashbalance (ii) Bankpassbookforbankbalance (iii) Personalledgerfordebtorsandcreditors (iv) Inventorybyactualcountingandvaluation. (v) Asregardsfixedassets,hepreparesalistofthem.Theproprietorwouldhelp
him bydisclosing the original cost and date of purchase. After deductingreasonable amount of depreciation, thewrittendownor depreciated valuewouldbeincludedintheStatementofAffairs.
Afterobtainingallnecessaryinformationaboutassetsandliabilities,thenexttaskoftheaccountantsistopreparestatementofaffairsattwodifferentpointsoftime.Thedesignofthestatementofaffairsisjustlikebalancesheetasgivenbelow:
Statement of affairs as on ...............
Liabilities ` Assets `
Capital(Bal.Fig.)Loans,BankoverdraftSundrycreditorsBillspayableOutstanding expenses
xxxxxxxx
BuildingMachineryFurnitureInventorySundrydebtorsBillsreceivableLoans and advancesCashandbankPrepaid expenses
xxxxxxxxxxxxxxxxxx
xx xx
Now from the statement of affairs prepared for two different dates, opening andclosingcapitalbalancescanbeobtained.
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14.6 ACCOUNTING
3.2 Difference between Statement of Affairs and Balance Sheet
Basis Statement of affairs Balance sheet
Reliability It is prepared on the basis oftransactions partly recordedon the basis of double entrybookkeepingandpartlyonthebasis of single entry. Most ofthe assets are recorded on the basisof estimates, assumptions,information gathered frommemoryratherthanrecords.
Itisbasedontransactionsrecordedstrictly on the basis of doubleentry book keeping; each item inthe balance sheet can be verifiedfromtherelevantsubsidiarybooksand ledger. Hence the balancesheet isnotonlyreliable,butalsodependable.
Capital In this statement, capital ismerelyabalancingfigurebeingexcess of assets over capital.Henceassetsneednotbeequaltoliabilities.
Capital isderived fromthecapitalaccountintheledgerandthereforethetotalofassetssidewillalwaysbe equal to the total of liabilitiesside.
Omission Sincethisstatementispreparedon the basis of incompleterecords, it is very difficult, tolocatetheassetsandliabilities,iftheyareomittedfromthebooks.
Thereisnopossibilityofomissionof any item of asset and liabilitysince all items are properlyrecorded. Moreover, it is easy tolocatethemissing itemssincethebalancesheetwillnotagree.
Basis ofValuation
The valuation of assets isgenerally done in an arbitrarymanner;thereforenomethodofvaluationisdisclosed.
The valuation of assets is doneon scientific basis, that is originalcostinthecaseofnewassetsanddepreciated amount on the basisofcostminusdepreciationtodateforusedassets.Anychangeinthemethod of valuation is properlydisclosed.
Objects The object of preparing thisstatement in the calculation ofcapitalfigures in thebeginningandattheendoftheaccountingperiodrespectively.
Theobjectofpreparingthebalancesheet is to ascertain the financialpositiononaparticulardate.
3.3 Preparation of Statement of Affairs and Determination of Profit
IthasbeendiscussedinPara3.1thatfiguresofassetsandliabilitiesshouldbecollectedforpreparationofstatementofaffairs.Givenbelowanexample:© The Institute of Chartered Accountants of India
ACCOUNTS FROM INCOMPLETE RECORDS 14.7
ILLUSTRATION 1Assets and Liabilities of Mr. X as on 31-12-2015 and 31-12-2016 are as follows:
31-12-2015 31-12-2016
` `
Assets
Building
Furniture
Inventory
Sundry debtors
Cash at bank
Cash in hand
1,00,000
50,000
1,20,000
40,000
70,000
1,200
?
?
2,70,000
90,000
85,000
3,200Liabilities
Loans
Sundry creditors
1,00,000
40,000
80,000
70,000
Decided to depreciate building by 2.5% and furniture by 10%. One Life Insurance Policy of the Proprietor was matured during the period and the amount ` 40,000 is retained in the business. Proprietor took @ ` 2,000 p.m. for meeting family expenses.Prepare Statement of Affairs.Solution
Statement of Affairsas on 31-12-2015 & 31-12-2016
Liabilities 31-12-15 31-12-16 Assets 31-12-15 31-12-16
` ` ` `
Capital(Bal.Fig.)LoansSundrycreditors
2,41,200
1,00,00040,000
4,40,700
80,00070,000
BuildingFurnitureInventorySundrydebtorsCashatbankCash in hand
1,00,00050,000
1,20,00040,00070,0001,200
97,50045,000
2,70,00090,00085,0003,200
3,81,200 5,90,700 3,81,200 5,90,700
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14.8 ACCOUNTING
ILLUSTRATION 2Take figures given in Illustration 1. Find out profit of Mr. X.Solution
Determination of Profit by applying the method of the capital comparison
`
CapitalBalanceason31-12-2016Less:Freshcapitalintroduced
Add:Drawings(`2000×12)
Less:CapitalBalanceason31-12-2015
Profit
4,40,700(40,000)4,00,70024,0004,24,700(2,41,200)
1,83,500 Note : • Closingcapitalisincreasedduetofreshcapitalintroduction,soitisdeducted. • Closing capitalwas reduceddue towithdrawal by proprietor; so it is added
back.
ILLUSTRATION 3A and B are in Partnership having Profit sharing ratio 2:1. The following information is available about their assets and liabilities:
31-3-2016 31-3-2017
` `
FurnitureAdvancesCreditorsDebtorsInventoryLoanCash at Bank
1,20,00070,00032,00040,00060,00080,000
?50,00030,00045,00074,750
—50,000 1,40,000
The partners are entitled to salary@`2,000p.m.Theycontributedproportionatecapital.Interestispaid@6%oncapitalandcharged@10%ondrawings.
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ACCOUNTS FROM INCOMPLETE RECORDS 14.9
Drawings of A and B
A B` `
April 30May 31June 30Sept. 30Dec. 31Feb. 28
2,000—
4,000—
2,000—
—2000
—6,000
—8,000
On 30th June, they took C as 1/3rd partner who contributed ` 75,000. C is entitled to share of 9 months’ profit. The new profit ratio becomes 1:1:1. A withdrew his proportionate share. Depreciate furniture @ 10% p.a., new purchases ` 10,000 may be depreciated for 1/4th of a year.
Current account balances as on 31-3-2016: A ` 5,000 (Cr.), B ` 2,000 (Dr.)Prepare Statement of Profit, Current Accounts of partners and Statement of Affairs as on 31-3-2017.Solution
Statement of AffairsAs on 31-3-2016 and 31-3-2017
Liabilities 31-3-2016 31-3-2017 Assets 31-3-2016 31-3-2017` ` ` `
CapitalA/c’s
A
B
C
Loan
Creditors
CurrentA/c’s
A
B
C
1,50,000
75,000
—
80,000
32,000
5,000
—
75,000
75,000
75,000
—
30,000
74,036*
48,322*
50,142*
FurnitureAdvancesInventoryDebtorsCashatbankCurrentA/cB
1,20,00070,00060,00040,00050,0002,000
1,17,75050,00074,75045,000
1,40,000—
3,42,000 4,27,500 3,42,000 4,27,500
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14.10 ACCOUNTING
*SeecurrentA/cs.Notes:(i) Depreciation on Furniture
10%on`1,20,000
10%on`10,000for1/4year
12,000
25012,250
(ii) Furniture as on 31-3-2016
Balanceason31-3-2016
Add:newpurchase
Less:Depreciation
1,20,000
10,0001,30,000
(12,250)1,17,750
(iii) Total of Current Accounts as on 31-3-2017
TotalofAssets(1,17,750+50,000+74,750+45,000+1,40,000)
Less:FixedCapital(75,000+75,000+75,000)+Liabilities(30,000)
4,27,500
(2,55,000)1,72,500
Thisisafteraddingsalary,interestoncapitalanddeductingdrawingsandinterestondrawings.(iv) InterestonCapital: `
A: onon
1,50,00075,000
@6%for3months@6%for9months
2,2503,3755,625
B: on 75,000 @6%for1year 4,5003,375C: on 75,000 @6%for9months7,875
(v) InterestonDrawings:A: on
onon
2,0004,0002,000
@10%for11months@10%for9months@10%for3months
18330050533
B: ononon
2,0006,0008,000
@10%for10months@10%for6months@10%for1month
16730067534
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ACCOUNTS FROM INCOMPLETE RECORDS 14.11
AllocationofProfit
3monthsProfit
9monthsProfit
A:2/3×`28,767+1/3×`86,300
B:1/3×`1,15,067
C:1/3×`86,300
`1,15,067
`28,767
`86,300
= `47,944
= `38,356
= `28,767`1,15,067
Current AccountsA B C A B C
To Balance b/d
— 2,000 — ByBalanceb/d 5,000 — —
To Drawings 8,000 16,000 — BySalary 24,000 24,000 18,000To Interest on drawings 533 534
— By Interest onCapital 5,625 4,500 3,375
To Balance c/d(b.f.)
74,036 48,322 50,142 By Share ofProfit
47,944 38,356 28,767
82,569 66,856 50,142 82,569 66,856 50,142
Statement of Profit`
CurrentAccountBalancesason31-3-2017Less:SalaryA`2,000×12 =24,000 B ` 2,000×12 =24,000 C `2,000×9 =18,000Less:InterestonCapital A 5,625 B 4,500 C 3,375Add:Drawings A 8,000 B 16,000Add:InterestonDrawings A 533 B 534
Less:CurrentA/CBalanceason31-3-2016(`5,000–`2,000)
1,72,500
(66,000)
(13,500)
24,000
1,0671,18,067(3,000)
1,15,067
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14.12 ACCOUNTING
ILLUSTRATION 4The Income Tax Officer, on assessing the income of Shri Moti for the financial years 2015-2016 and 2016-2017 feels that Shri Moti has not disclosed the full income. He gives you the following particulars of assets and liabilities of Shri Moti as on 1st April, 2015 and 1st April, 2017.
`
1-4-2015 Assets : Cash in hand 25,500Inventory 56,000Sundry debtors 41,500Land and Building 1,90,000Wife’s Jewellery 75,000
Liabilities : Owing to Moti’s Brother 40,000Sundry creditors 35,000
1-4-2017 Assets : Cash in hand 16,000Inventory 91,500Sundry debtors 52,500Land and Building 1,90,000Motor Car 1,25,000Wife’s Jewellery 1,25,000Loan to Moti’s Brother 20,000
Liabilities : Sundry creditors 55,000
During the two years the domestic expenditure was ` 4,000 p.m. The declared income of the financial years were ` 1,05,000 for 2015-2016 and ` 1,23,000 for 2016-2017 respectively.State whether the Income-tax Officer’s contention is correct. Explain by giving your workings.Solution
Capital Account of Shri Moti1-4-2015 1-4-2017
` ` ` `
AssetsCash in hand 25,500 16,000Inventory 56,000 91,500Sundrydebtors 41,500 52,500Land & Building 1,90,000 1,90,000Wife’sJewellery 75,000 1,25,000
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ACCOUNTS FROM INCOMPLETE RECORDS 14.13
Motor Car — 1,25,000LoantoMoti’sBrother — 20,000
3,88,000 6,20,000Liabilities:OwingtoMoti’sBrother 40,000 —Sundrycreditors 35,000 75,000 55,000 55,000Capital 3,13,000 5,65,000Incomeduringthetwoyears:Capitalason1-4-2017 5,65,000Add:Drawings–DomesticExpenses for the twoyears (` 4,000×24months)
96,000
6,61,000Less:Capitalason1-4-2015 (3,13,000)Incomeearnedin2015-2016and2016-2017 3,48,000Incomedeclared(`1,05,000+`1,23,000) 2,28,000SuppressedIncome 1,20,000
TheIncome-taxofficer’scontentionthatShriMotihasnotdeclaredhistrueincomeiscorrect.ShriMoti’strueincomeisinexcessofthedisclosedincomeby`1,20,000.
4. TECHNIQUES OF OBTAINING COMPLETE ACCOUNTING INFORMATION
Whenbooksofaccountsareincomplete,itisessentialinthefirstinstancetocompletedoubleentryinrespectofalltransactions.ThewholeaccountingprocessshouldbecarefullyfollowedandTrialBalanceshouldbedrawnup.4.1 General TechniquesWheretheaccountsofabusinessareincomplete,itisadvisabletoconvertthemfirstto thedoubleentrysystemandthentodrawuptheProfitandLossAccountandtheBalance Sheet, insteadof determining the amountof profit/loss bypreparingthestatementofaffairs.Asbooksofaccountsofdifferentfirmsbeing incompleteinvaryingdegrees,itisnotpossibletosuggestaformulawhichcoulduniformlybeappliedforpreparingfinalaccountstherefrom.Asageneralrule,itisessentialfirsttostarttheledgeraccountswiththeopeningbalancesofassets,liabilitiesandthecapital.Afterwards,eachbookoforiginalentryshouldbeseparatelydealtwith,soastocompletethedoubleentrybypostingintotheledgersuchentriesashavenotbeenposted.Forexample,IfonlypersonalaccountshavebeenpostedfromtheCashBook,debitsandcreditspertainingtonominalaccountsandrealaccountsthatarenotposted,shouldbepostedintotheledger.IfthereareDiscountColumnsintheCashBook,thetotalsofdiscountspaidandreceivedshouldbepostedtoDiscounts
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14.14 ACCOUNTING
AllowedandDiscountsReceivedAccounts respectively, forcompleting thedoubleentry.Afterwards, theother subsidiarybooks, i.e., PurchasesDayBook, SalesDayBook,ReturnBookandBillsReceivableandPayable,etc. shouldbe totaledupand theirtotalspostedintotheledgertothedebitorcreditoftheappropriatenominalorrealaccounts,thepersonalaspectofthetransactionshavingbeenpostedalready.WhenanAccountantisengagedinpostingtheunposteditemsfromtheCashBookandothersubsidiarybooks,hemaybeconfrontedwithanumberofproblems.Themannerinwhichsomeofthemmaybedealtwithisdescribedbelow: (1) In the Cash Book, there might be entered several receipts which have no
connection with the business but which belong to the proprietor, e.g.,interestcollectedonhisprivateinvestment,legaciesreceivedbyhim,amountcontributedbytheproprietorfromhisprivateresources,etc.Allthoseamountsshould be credited to his capital account. Also the Cash Bookmay containentriesinrespectofpaymentsforproprietor’spurchasesmadebythebusiness.Allsuchitemsshouldbedebitedtohiscapitalaccount.
(2) Amounts belonging to the business after collectionmay have been directlyutilisedforacquiringbusinessassetsorformeetingcertainexpensesinsteadofbeingdepositedintotheCashBook.Ontheotherhand,theproprietormayhavemet someof thebusiness expenses fromhisprivate resources. In thatcase, the appropriate asset or expense account should be debited and thesourcewhichhadprovidedfundscredited.
(3) If cash is short, because the proprietor hadwithdrawn amountwithout anyentry having been made in the cash book the proprietor’s capital accountshouldbedebited.Infact,itwillbenecessarytodebitorcredittheproprietor’scapitalaccountinrespectofallunidentifiedamountswhichcannotbeadjustedotherwise.
(4) Wherethebenefitofanitemofanexpenseisreceivedbothbytheproprietorandbusiness, then it shouldbeallocatedbetween themon someequitablebasis e.g. rent of premises when the proprietor lives in the same premises,shouldbeallocatedonthebasisoftheareaoccupiedbyhimforresidence.
Intheend,itwillbepossibletoextractaTrialBalance.Studentsareadvisedalwaystodosoasitwilldiscloseanymistakescommittedinmakingadjustments.4.2 Derivation of Information from Cash BookTheanalysisofcashaswellasbankreceiptsandpayments,shouldbeextensivebutunder significant heads, so that various items of income and expenditure can bepostedtherefromintotheledger.Howeverbeforepostingtheinformationintothe
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ACCOUNTS FROM INCOMPLETE RECORDS 14.15
ledgerthesameshouldbecollectedintheformofanaccount,thespecimenwhereofisshownbelow:Cash and Bank Summary Account for the year ended (assumed figures)
Cash Bank Cash Bank` ` ` `
To Balance in hand (opening)
590 7,400 ByExpenses(Sundry payments)
3,000 -
To Sales 6,500 - ByPurchases 100 6,000ToCollectionfrom BySundrycreditors - 5,000debtors - 10,000 ByDrawings 1,500 -
ByPettyexpenses 800 -ByRent - 1,000ByElectricityandwater 350 -ByRepairs 350 -ByWages - 1,000ByBalanceinHand 990 4,400
7,090 17,400 7,090 17,400Theimportantpointaboutincompleterecordsisthatmuchoftheinformationmaynotbereadilyavailableandthattherelevant informationhastobeascertained.AgoodpointistoprepareCashandBankSummary(ifnotavailableinproperformwithbothsidestallied).Thecashandbankbalanceattheendshouldbereconciledwiththecashandbankbooks.Havingdoneso,thevariousitemsdetailedontheSummaryStatements,shouldbepostedintotheledger.Itisquitelikelythatsomeofthemissinginformationwillthenbeavailable.Considerthefollowingaboutafirmrelatingto2016:
`
CashBalanceon1stJan.,2016 250Bankoverdrafton1stJan.,2016 5,400Cash purchases 3,000CollectionfromSundrydebtors 45,600Saleofoldfurniture 750PurchaseofMachinery 12,000PaymentofSundrycreditors 26,370Expenses 8,450FreshCapitalbroughtin 5,000Drawings 3,230CashBalanceon31stDec.,2016 310Bankbalanceon31stDec.,2016 1,180
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14.16 ACCOUNTING
NowpreparethecashandBankSummary.
Cash and Bank Summary
Dr. Cr.` `
CashBalanceason1-1-2016 250 Bankoverdraft 5,400CollectionfromSundrydebtors 45,600 Cash purchases 3,000Saleofoldfurniture 750 PurchaseofMachinery 12,000FreshCapitalbroughtin 5,000 PaymenttoSundrycreditors 26,370Balancingfigure 8,340 Expenses 8,450
Drawings 3,230Cashbalanceon31-12-2016 310Bankbalanceon31-12-2016 1,180
59,940 59,940
See thatdebit side is shortby` 8,340.Whatmaybe thepossible sourceof cashinflow?
Maybecashsales.
4.3 Analysis of Sales Ledger and Purchase Ledger
Sales Ledger: Itwoulddiscloseinformationpertainingtotheopeningbalanceofthedebtors,thegoodssoldtothemoncreditduringtheyear,billsreceivabledishonored,if any; cash received from them in theaccountingperiod,discount, rebateor anyotherconcessionallowedtothem,receiptsofbillsreceivable,returnsinwards,baddebtswrittenoffandtransfers.Journalentriesmustbemadebydebitingorcreditingtheimpersonalaccountsconcernedwithcontracreditordebitgiventototaldebtorsaccount.
Analysis of Sales Ledger of the year
OPCustomerBalance
Sales BillsDisho-noured
Total Debits
Cash Recd.
Discounts Allowed
Bills Recd.
Sales Returns
Bad Debts
Total credit
Balance (cl.)
Fromtheaforementioned,itwillbepossibletobuildupinformationaboutsalesandotheraccountswhichcan thenbeposted in totals, if sodesired. ItwouldalsobepossibletoprepareTotalDebtors.
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ACCOUNTS FROM INCOMPLETE RECORDS 14.17
Accountinthefollowingform:
Total Debtors Account (assumed figures)
` `
Openingbalance 5,000 Cash/Bank 10,000Sales 38,000 Discount 500Bills dishonored 280 Billsreceivable 20,000Interest 100 Baddebts 280
Closingbalance 12,60043,380 43,380
ItisevidentthatanysingleamountcomprisedinthetotalDebtorsAccountcanbeascertainediftheotherfiguresareprovided.Forinstance,iftheinformationaboutsales isnotavailable itcouldbeascertainedasabalancingfigure, i.e., inthetotalDebtorsAccountgivenabove,ifallotherfiguresaregiven,amountofsalesoncreditbasiscanbeeasilyascertained.Purchases Ledger: Generally speaking, aPurchases Ledger isnotas commonly inexistenceastheDebtorsLedgerforitbeingconvenienttomakeentriesinrespectofoutstandingliabilitiesatthetimetheyarepaidratherthanwhentheyareincurred.The information isavailable in respectofopeningbalanceof thecreditors,goodspurchasedoncredit,billspayabledishonored;cashpaidtothecreditorsduringtheyear,discountandotherconcessionsobtained,returnsoutwardsandtransfers.Herealso,journalentriesmustbemadebydebitingorcreditingtherespectiveimpersonalaccounts.Contracreditordebitbeinggiventototalcreditor’saccount.Ifaproperrecordofreturntocreditors,discountallowedbythemetc.,hasnotbeenkept, itwillnotbepossibletowriteuptheTotalCreditorsA/c. Insuchacase,netcreditpurchasewillbeascertainedasfollows:CashpaidtoCreditorsincludingonaccountofbillspayableduringtheperiod ...................ClosingbalanceofCreditorsandBillsPayable ................... Total ___________Less:OpeningbalanceofCreditorsandBillsPayable ...................Netcreditpurchaseduringtheperiod ...................AlternativelyCashpaidtocreditorsduringtheperiod ...................Add:BillsPayableissuedtothem ................... Total __________ClosingbalanceofCreditorsLess:Openingbalanceofcreditors ...................Credit Purchases during the period ...................Theinformationmayalsobeputintheformofanaccount,justliketheTotalDebtorsAccount.
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14.18 ACCOUNTING
Nominal Accounts :Itisquitelikelythatthetotalexpenditureshownbybalanceofnominalaccountmaycontainitemsofexpenditurewhichdonotrelatetotheyearforwhichaccountsarebeingpreparedand, also, theremayexist certain itemsofexpenditure incurredbutnotpaid,whichhavenotbeen includedtherein.Onthataccount,eachandeveryaccount shouldbeadjusted in themanner shownbelow(figuresassumed):
Cash and Particulars
Amount Bank Payment
Paid out of Accrued
Total Private Fund
Pre Payment
Expenses for the period
1 2 3 4 5(2+3+4) 6 7(5-6)` ` ` ` ` `
Rent & Rates 2,200 300 100 2,600 150 2,450Salaries 4,500 500 1,000 6,000 250 5,750
Only the amount entered as “expenses for the period” should be posted to therespectivenominalaccounts.Asimilaradjustmentofnominalaccountsinrespectofrevenuereceiptshouldbemade.Letuscontinuewiththeexamplegiveninpara4.2.Givensomeotherinformation,howtocomputecreditpurchaseandcreditsaleisdiscussedbelow:
Openingbalance(1-1-2016) `
Inventory 20,000Sundrycreditors 12,300Sundrydebtors 15,000ClosingBalance(31-12-2016)Inventory 15,000Sundrycreditors 13,800Sundrydebtors 25,600Discountreceivedduring2016 1,130Discount allowed 1,870
Whatarethepurchasesfor2016?LetuspreparetheSundryCreditorsAccount.
Sundry Creditors Account
` `
ToCash(exampleinpara4.2) 26,370 ByBalanceb/d 12,300ToDiscount(received) 1,130 (opening)ToBalancec/d(closing) 13,800 By Purchases (balancing
figure)29,000
41,300 41,300
© The Institute of Chartered Accountants of India
ACCOUNTS FROM INCOMPLETE RECORDS 14.19
The credit purchases are `29,000;cashpurchasesare`3,000(exampleinpara4.2):hence total purchases are `32,000.
LikewisepreparetheSundryDebtorsAccount:
Sundry Debtors Account
` `
ToBalanceb/d 15,000 ByCash(exampleinpara4.2) 45,600ToCreditsales(balancingfigure)
58,070 ByDiscount(allowed) 1,870
ByBalancec/d 25,60073,070 73,070
Sototalsales =creditsales+cashsales = `58,070+`8,340(exampleinpara4.2)=`66,4104.4 Distinction between Business Expenses and DrawingsIthasbeenalreadystatedthatoftenthedistinctionisnotmadebetweenbusinessexpensesanddrawings.While completingaccounts from incomplete records, it isnecessary to scan the business transactions carefully to identify the existence ofdrawings.The main items of drawings are (illustrative): • rentofpremisescommonlyusedforresidentialaswellasbusinesspurposes; • commonelectricityandtelephonebills; • lifeinsurancepremiumsofproprietor/partnerspaidfrombusinesscash; • householdexpensesmetfrombusinesscash; • privateloanpaidtofriendsandrelativesoutofbusinesscash; • personalgiftsmadetoanyfriendsandrelativesoutofbusinesscash; • goodsorservicestakenfromthebusinessforpersonalconsumption; • cashwithdrawalstomeetfamilyexpenses.Soitisnecessarytoscanthesummaryofcashtransactions,businessresourcesandtheirutilisationtoassessthenatureofdrawingsanditsamount.4.5 Fresh Investment by proprietors / partnersLikedrawings,oftenfreshinvestmentsmadebyproprietors’partnersarenotreadilyidentifiable.Itbecomesnecessarytoscanthebusinesstransactionscarefully.Apartfromdirectcashinvestment,freshinvestmentsmaytakethefollowingshape: • MoneycollectedandputinthebusinessonmaturityofLifeInsurancePolicy
oftheproprietors; • Interestanddividendofpersonalinvestmentoftheproprietorscollectedand
putinthebusiness; • Incomefromnon-businesspropertycollectedandputinthebusiness.
© The Institute of Chartered Accountants of India
14.20 ACCOUNTING
Unlesstheseitemsareproperlyidentifiedandsegregated,businessincomewillbeaffectedandproperstatementofaffairscannotbeprepared.
ILLUSTRATION 5The following information relates to the business of Mr. Shiv Kumar, who requests you to prepare a Trading and Profit & Loss Account for the year ended 31st March, 2017 and a Balance Sheet as on that date:(a)
Balance as on 31st March, 2016 `
Balance as on 31st March, 2017 `
Building 3,20,000 3,60,000Furniture 60,000 68,000Motorcar 80,000 80,000Inventory ? 40,000Bills payable 28,000 16,000Cash and bank balances 1,80,000 1,04,000Sundry debtors 1,60,000 ?Bills receivable 32,000 28,000Sundry creditors 1,20,000 ?
(b) Cash transactions during the year included the following besides certain other items:
` `
Sale of old papers and miscellaneous income
20,000 Cash purchases 48,000
Miscellaneous Trade expenses (including salaries etc.)
80,000 Payment to creditors 1,84,000
Collection from debtors 2,00,000 Cash sales 80,000
(c) Other information: • Bills receivable drawn during the year amount to ` 20,000 and Bills payable
accepted ` 16,000. • Some items of old furniture, whose written down value on 31st March, 2016 was
` 20,000 was sold on 30th September, 2016 for ` 8,000. Depreciation is to be provided on Building and Furniture @ 10% p.a. and on Motorcar @ 20% p.a. Depreciation on sale of furniture to be provided for 6 months and for additions to Building for whole year.
• Of the Debtors, a sum of ̀ 8,000 should be written off as Bad Debt and a reserve for doubtful debts is to be provided @ 2%.
© The Institute of Chartered Accountants of India
ACCOUNTS FROM INCOMPLETE RECORDS 14.21
• Mr. Shivkumar has been maintaining a steady gross profit rate of 30% on turnover.
• Outstanding salary on 31st March, 2016 was ` 8,000 and on 31st March, 2017 was ̀ 10,000. On 31st March, 2016, Profit and Loss Account had a credit balance of ` 40,000.
• 20% of total sales and total purchases are to be treated as for cash. • Additions in Furniture Account took place in the beginning of the year and there
was no opening provision for doubtful debts.
SolutionTrading and Profit and Loss Account of Mr. Shiv Kumar
for the year ended 31st March, 2017
` `
ToOpeninginventory (balancingfigure)
80,000 BySales(3,20,000*×100/80)ByClosinginventory
4,00,00040,000
To Purchases (1,92,000x100/80)
2,40,000
ToGrossprofitc/d@30%onsales 1,20,000
4,40,000 4,40,000To Miscellaneous expenses (`80,000–`8,000+`10,000)
82,000 ByGrossprofitb/dByMiscellaneous receipts By Net loss transferred to CapitalA/c(b.f.)
1,20,00020,00025,840
ToDepreciation: Building `36,000 Furniture `7,800(`6,800+`1,000) Motor Car `16,000 59,800ToLossonsaleoffurniture 11,000ToBaddebts 8,000ToProvisionfordoubtful debts
5,0401,65,840 1,65,840
*Total Sales (80,000 x 10020 )-Cash Sales (80,000)
© The Institute of Chartered Accountants of India
14.22 ACCOUNTING
Balance Sheet of Mr. Shivkumaras on 31st March, 2017
Liabilities ` ` Assets ` ` Capital as on 1st April,2016
7,16,000 Building Add:Addition duringtheyear
3,20,00040,000
ProfitandLossA/cOpeningbalance
40,000 Less:Provisionfor depreciation
3,60,000(36,000)
3,24,000Less:Lossfortheyear
(25,840) 14,160 FurnitureLess:Soldduring
60,000
Sundrycreditors 1,12,000 theyear (20,000)Billspayable 16,000 40,000Outstanding salary 10,000
Add:Additionduring theyear
28,00068,000
Less:Depreciation (6,800) 61,200Motorcar(atcost) 80,000Less:Depreciation (16,000) 64,000Inventoryintrade 40,000Sundrydebtors 2,52,000Less:Provisionfordoubtfuldebts@2% (5,040) 2,46,960Billsreceivable 28,000Cash in hand and at bank
1,04,000
8,68,160 8,68,160
© The Institute of Chartered Accountants of India
ACCOUNTS FROM INCOMPLETE RECORDS 14.23
Working Notes:(i) Sundry Debtors Account
` `
ToBalanceb/dToSalesA/c(credit)
1,60,0003,20,000
ByCash/BankA/cByBillsReceivableA/cByBaddebtsA/cByBalancec/d(bal.fig.)
2,00,00020,0008,000
2,52,0004,80,000 4,80,000
(ii) Sundry Creditors Account
` `
ToCash/BankA/c
ToBillsPayableA/c
ToBalancec/d
(bal.fig.)
1,84,000
16,000
1,12,000
ByBalanceb/d
ByPurchasesA/c
1,20,000
1,92,000
3,12,000 3,12,000
(iii) Bills Receivable Account
` `
ToBalanceb/d
ToSundryDebtorsA/c
32,000
20,000
ByCash/BankA/c(bal.fig.)
ByBalancec/d
24,000
28,00052,000 52,000
(iv) Bills Payable Account
` `
ToCash/BankA/c(bal.fig.)
ToBalancec/d
28,000
16,000
ByBalanceb/d
BySundryCreditorsA/c
28,000
16,00044,000 44,000
© The Institute of Chartered Accountants of India
14.24 ACCOUNTING
(v) Furniture Account
` `
ToBalanceb/d
ToBankA/c(b.f.)
60,000
28,000
ByBank/CashA/c
ByDepreciationA/c(onfurnituresold)
ByProfitandlossA/c(lossonsale)(20,000–1,000–8,000)
ByDepreciationA/c(68,000x10%)
ByBalancec/d(68,000–6,800)
8,000
1,000
11,000
6,800
61,20088,000 88,000
(v) Cash/Bank Account
` `
ToBalanceb/dToMiscellaneousreceiptsA/cToSundrydebtorsA/cToSalesA/cToFurnitureA/c(sale)ToBillsreceivableA/c
1,80,00020,000
2,00,00080,0008,00024,000
ByMisc.tradeexpensesA/cByPurchasesA/cByFurnitureA/cBySundrycreditorsA/cByBillspayableA/cBy Building A/c (3,60,000 – 3,20,000)ByBalancec/d
80,00048,00028,000
1,84,00028,00040,000
1,04,000
5,12,000 5,12,000
(vii) Opening Balance Sheet of Mr. Shivkumar as on 31st March, 2016
Liabilities ` Assets `
Capital(balancingfigure)ProfitandlossA/cSundryCreditorsBillsPayableOutstandingsalary
7,16,00040,000
1,20,00028,0008,000
BuildingFurnitureMotor carInventoryintradeSundryDebtorsBillsReceivableCashinhandandatbank
3,20,00060,00080,00080,000
1,60,00032,000
1,80,0009,12,000 9,12,000
© The Institute of Chartered Accountants of India
ACCOUNTS FROM INCOMPLETE RECORDS 14.25
ILLUSTRATION 6
A. Adamjee keeps his books on single entry basis. The analysis of the cash book for the year ended on 31st December, 2016 is given below:
Receipts ` Payments `
Bank Balance as on 1st January, 2016Received from Sundry DebtorsCash SalesCapital brought during the yearInterest on Investments
2,800
48,000
11,000
6,000200
Payments to Sundry creditorsSalariesGeneral expensesRent and TaxesDrawingsCash purchasesBalance at Bank on 31st Dec., 2016Cash in hand on 31st Dec., 2016
35,0006,5002,5001,5003,600
12,0006,400
50068,000 68,000
Particulars of other assets and liabilities are as follows:
1st January, 2016 31st December, 2016Sundry debtorsSundry creditorsMachineryFurnitureInventoryInvestments
14,5005,8007,5001,2003,9005,000
17,6007,9007,5001,2005,7005,000
Prepare final accounts for the year ending 31st December, 2016 after providing depreciation at 10 percent on machinery and furniture and ` 800 against doubtful debts.
Solution
A. Adamjee
Trading and Profit & Loss Account for the year ended 31-12-2016
` ` `
ToOpeningInventory 3,900 BySales 62,100To Purchases 49,100 ByClosingInventory 5,700ToGrossprofitc/d(b.f.) 14,800
67,800 67,800To Salaries 6,500 ByGrossProfitb/d 14,800
© The Institute of Chartered Accountants of India
14.26 ACCOUNTING
To Rent and Taxes 1,500 ByInterestoninvestment 200To General expenses 2,500ToDepreciation:Machinery@10% 750Furniture@10% 120 870To Provision for doubtful debts
800
ToBalancebeingprofitcarriedtoCapitalA/c(b.f.) 2,830
15,000 15,000
Balance Sheet as on 31st December, 2016
Liabilities ` ` Assets ` `
A.Adamjee’sCapital Machinery 7,500on1stJanuary,2016 29,100 Less:Depreciation (750) 6,750Add:FreshCapital 6,000 Furniture 1,200Add:Profitfortheyear 2,830 Less:Depreciation (120) 1,080
37,930Less:Drawings (3,600) 34,330 Inventory-in-trade 5,700
Sundrydebtors 17,600Sundrycreditors 7,900 Less:Provisionfor
Doubtfuldebts (800) 16,800Investment 5,000Cashatbank 6,400Cash in hand 500
42,230 42,230
Working Notes :
1. Balance sheet of A. Adamjee as on 1-1-2016
` `
Sundrycreditors 5,800 Machinery 7,500A.Adamjee’scapital 29,100 Furniture 1,200(balancingfigure) Inventory 3,900
Sundrydebtors 14,500Investments 5,000Bankbalance(fromCashstatement) 2,800
34,900 34,900
© The Institute of Chartered Accountants of India
ACCOUNTS FROM INCOMPLETE RECORDS 14.27
2. Ledger Accounts A. Adamjee’s Capital Account
` `
Dec.31 To Drawings 3,600 Jan.1 ByBalance 29,100Dec.31 ToBalancec/d(b.f.) 31,500 Dec.31 ByCash 6,000
35,100 35,100Sales Account
` `
Dec.31 ToTradingA/c(b.f.) 62,100 Dec.31 ByCash 11,000Dec.31 ByTotalDebtors
Account51,100
62,100 62,100
Total Debtors Account
` `
Jan.1 ToBalanceb/d 14,500 Dec.31 ByCash 48,000Dec.31 To Credit sales 51,100 Dec.31 ByBalancec/d 17,600
(Balancingfigure)65,600 65,600
Jan.1 ToBalanceb/d 17,600
Purchases Account
` `
Dec.31 ToCashA/c 12,000 Dec.31 ByTradingAccount(b.f.) 49,100To Total Creditors A/c
37,100
49,100 49,100
Total Creditors Account
` `
Dec.31 To Cash 35,000 Jan.1 ByBalanceb/d 5,800Dec.31 ToBalanceb/d 7,900 Dec.31 ByCreditPurchases 37,100
(Balancingfigure)42,900 42,900
© The Institute of Chartered Accountants of India
14.28 ACCOUNTING
ILLUSTRATION 7
From the following data, you are required to prepare a Trading and Profit and Loss Account for the year ended 31st March, 2017and a Balance Sheet as at that date. All workings should form part of your answer.
Assets and Liabilities As on1st April 2016
As on31st March 2017
` ` Creditors 15,770 12,400Sundry expenses outstanding 600 330Sundry Assets 11,610 12,040Inventory in trade 8,040 11,120Cash in hand and at bank 6,960 8,080Trade debtors ? 17,870Details relating to transactions in the year:Cash and discount credited to debtors 64,000Sales return 1,450Bad debts 420Sales (cash and credit) 71,810Discount allowed by trade creditors 700Purchase returns 400Additional capital-paid into Bank 8,500Realisations from debtors-paid into Bank 62,500Cash purchases 1,030Cash expenses 9,570Paid by cheque for machinery purchased 430Household expenses drawn from Bank 3,180Cash paid into Bank 5,000Cash drawn from Bank 9,240Cash in hand on 31-3-2017 1,200Cheques issued to trade creditors 60,270
© The Institute of Chartered Accountants of India
ACCOUNTS FROM INCOMPLETE RECORDS 14.29
SolutionTrading and Profit & Loss Account
for the year ending 31st March, 2017
` ` ` `
ToOpeningInventory 8,040 BySales: Cash 4,600
To Purchases (58,000+1,030)
59,030 Credit 67,210
Less:Returns (400) 58,630 71,810ToGrossprofitc/d(b.f.) 14,810 Less:Returns (1,450) 70,360
ByClosinginventory
11,120
81,480 81,480To Sundry expenses (W.N.(v))
9,300 ByGrossprofitb/d 14,810
To Discount 1,500 ByDiscount 700ToBadDebts 420ToNetProfittransfertoCapital(b.f.) 4,290
15,510 15,510Balance Sheet of M/s ....as on 31st March, 2017
Liabilities ` ` Assets `
Capital Sundryassets 12,040Openingbalance 26,770 Inventoryintrade 11,120Add:Addition 8,500 Sundrydebtors 17,870NetProfit 4,290 Cashinhand&atbank 8,080
39,560Less:Drawings (3,180) 36,380Sundrycreditors 12,400Outstanding expenses 330
49,110 49,110
© The Institute of Chartered Accountants of India
14.30 ACCOUNTING
Working Notes:(i) Cash sales
Combined Cash & Bank Account
` `
ToBalanceb/d 6,960 BySundrycreditors 60,270ToSundries(Contra) 5,000 BySundries(Contra) 5,000ToSundries(Contra) 9,240 BySundries(Contra) 9,240ToSundrydebtors 62,500 ByDrawings 3,180ToCapitalA/c 8,500 ByMachinery 430ToSales(CashSales-BalancingFigure) 4,600 BySundryexpenses 9,570
ByPurchases 1,030ByBalancec/d 8,080
96,800 96,800
(ii) Total Debtors Account
` `
ToBalanceb/d 16,530 ByBank 62,500(Balancingfigure) ByDiscount(64,000-62,500) 1,500ToSales(71,810–4,600) 67,210 ByReturnInward 1,450
ByBadDebts 420ByBalancec/d 17,870
83,740 83,740
(iii) Total Creditors Account
` `
ToBank 60,270 ByBalanceb/d 15,770To Discount 700 ByPurchases 58,000To Return Outward 400 (Balancingfigure)ToBalancec/d 12,400
73,770 73,770
(iv) Balance Sheet as on 1st April, 2016
Liabilities ` Assets `
Capital(balancingfigure) 26,770 SundryAssets 11,610SundryCreditors 15,770 InventoryinTrade 8,040
© The Institute of Chartered Accountants of India
ACCOUNTS FROM INCOMPLETE RECORDS 14.31
Outstanding Expenses 600 SundryDebtors(fromtotaldebtorsA/c)
16,530
Cashinhand&atbank 6,96043,140 43,140
(v)
`
Expenses paid in Cash 9,570Add:Outstandingon31-3-2017 330
9,900Less:Outstandingon1-4-2016 (600)
9,300
(vi) Duetolackofinformation,depreciationhasnotbeenprovidedonfixedassets.
ILLUSTRATION 8
Mr. Anup runs a wholesale business where in all purchases and sales are made on credit. He furnishes the following closing balances:
31-12-2015 31-12-2016Sundry debtors 70,000 92,000Bills receivable 15,000 6,000Bills payable 12,000 14,000Sundry creditors 40,000 56,000Inventory 1,10,000 1,90,000Bank 90,000 87,000Cash 5,200 5,300
Summary of cash transactions during the year 2016: (i) Deposited to bank after payment of shop expenses @ ` 600 p.m., wages @ `
9,200 p.m. and personal expenses @ ` 1,400 p.m. ` 7,62,750. (ii) Withdrawals ` 1,21,000. (iii) Cash payment to suppliers ` 77,200 for supplies and ` 25,000 for furniture. (iv) Cheques collected from customers but dishonoured ` 5,700. (v) Bills accepted by customers ` 40,000. (vi) Bills endorsed ` 10,000. (vii) Bills discounted ` 20,000, discount ` 750. (viii) Bills matured and duly collected ` 16,000. (ix) Bills accepted ` 24,000.
© The Institute of Chartered Accountants of India
14.32 ACCOUNTING
(x) Paid suppliers by cheque ` 3,20,000. (xi) Received ` 20,000 on maturity of one LIC policy of the proprietor by cheque. (xii) Rent received ` 14,000 by cheque for the premises owned by proprieter. (xiii) A building was purchased on 30-11-2016 for opening a branch for ` 3,50,000
and some expenses were incurred on this building, details of which are not maintained.
(xiv) Electricity and telephone bills paid by cash ` 18,700, due ` 2,200.Other transactions: (i) Claim against the firm for damage ` 1,55,000 is under legal dispute. Legal
expenses ` 17,000. The firm anticipates defeat in the suit. (ii) Goods returned to suppliers ` 4,200. (iii) Goods returned by customers ` 1,200. (iv) Discount offered by suppliers ` 2,700. (v) Discount offered to the customers ` 2,400. (vi) The business is carried on at the rented premises for an annual rent of ` 20,000
which is outstanding at the year end.Prepare Trading and Profit & Loss Account of Mr. Anup for the year ended 31-12-2016 and Balance Sheet as on that date.
SolutionTrading and Profit & Loss Account of Mr. Anup
for the year ended 31-12-2016` ` ` `
ToOpeningInventory 1,10,000 BySales 9,59,750To Purchases 4,54,100 Less:SalesLess:PurchasesReturn (4,200) 4,49,900 Return (1,200) 9,58,550ToGrossProfit(b.f.) 5,88,650 ByClosing
Inventory1,90,000
11,48,550 11,48,550ToWages(9,200x12) 1,10,400 ByGross 5,88,650
ToElectricity&Tel.Charges(18,700+2,200)
20,900 Profit
To Legal expenses 17,000 ByDiscount 2,700ToDiscount(2,400+750)
3,150
ToShopexp.(600x12) 7,200ToProvisionforclaimsfordamages
1,55,000
© The Institute of Chartered Accountants of India
ACCOUNTS FROM INCOMPLETE RECORDS 14.33
To Shop Rent 20,000ToNetProfit(b.f.) 2,57,700
5,91,350 5,91,350Balance-Sheet as on 31-12-2016
Liabilities ` Assets `
CapitalA/c(W.N.vi) 2,38,200 Building(fromsummarycashandbankA/c)
3,72,000
Add:Freshcapital Furniture 25,000introducedMaturityvaluefromLIC 20,000
Inventory 1,90,000
Rent 14,000 Sundrydebtors 92,000Add:NetProfit 2,57,700 Billsreceivable 6,000
5,29,900 CashatBank 87,000Less:Drawing(14,00x12) (16,800) 5,13,100 CashinHand 5,300Rent outstanding 20,000Sundrycreditors 56,000BillsPayable 14,000Outstanding expensesLegal Expenses 17,000Electricity&Telephone charges 2,200 19,200Provision for claims fordamages 1,55,000
7,77,300 7,77,300
Working Notes :
(i) Sundry Debtors Account
` `
ToBalanceb/d 70,000 ByBillReceivableA/c-ToBillreceivableA/c-Bills dishonoured
3,000 Billsacceptedby customers
40,000
ToBankA/c-Cheque dishonoured
5,700 ByBankA/c-
ToCreditsales(Balancing Figure)
9,59,750 Cheque received 5,700
© The Institute of Chartered Accountants of India
14.34 ACCOUNTING
ByCash(fromsummarycashandbankaccount)
8,97,150
ByReturninwardA/c 1,200ByDiscountA/c 2,400ByBalancec/d 92,000
10,38,450 10,38,450
(ii) Bills Receivable Account
` `
ToBalanceb/d 15,000 BySundrycreditorsA/cToSundryDebtorsA/c(Billsaccepted)
40,000 (Billsendorsed) 10,000
ByBankA/c(20,000–750) 19,250ByDiscountA/c(Billsdiscounted) 750ByBankBillscollectedonmaturity 16,000BySundrydebtorsBillsdishonoured(Bal.Fig) 3,000ByBalancec/d 6,000
55,000 55,000(iii) Sundry Creditors Account
` `
ToBank 3,20,000 ByBalancec/d 40,000To Cash 77,200 ByCreditpurchase
(Balancingfigure) 4,54,100ToBillPayableA/c 24,000ToBillReceivableA/c 10,000ToReturnOutwardA/c 4,200ToDiscountReceivedA/c 2,700ToBalanceb/d 56,000
4,94,100 4,94,100
(iv) Bills Payable A/c
` `
ToBankA/c(Balancefigure) 22,000 ByBalanceb/d 12,000ToBalancec/d 14,000 BySundrycreditorsA/c
Bills accepted 24,00036,000 36,000
© The Institute of Chartered Accountants of India
ACCOUNTS FROM INCOMPLETE RECORDS 14.35
(v) Summary Cash and Bank A/c
Cash Bank Cash Bank` ` ` `
ToBalanceb/d 5,200 90,000 ByBank 7,62,750ToSundrydebtors(Bal.Fig)
8,97,150 ByCash 1,21,000
ByShopexp.(600x12) 7,200To Cash 7,62,750 ByWages(9,200x12) 1,10,400ToBank 1,21,000 ByDrawingA/c(1,400
x12)16,800
ByBillsPayable 22,000ToSundayDebtors 5,700 BySundrycreditors 77,200 3,20,000ToBillsreceivable 19,250 ByFurniture 25,000ToBillsreceivable 16,000 BySundryDebtors 5,700ToCapital(maturityvalueofLICpolicy)
20,000 ByElectricity&Tel.Charges
18,700
ToCapital(Rentreceived)
14,000 ByBuilding(Bal.fig) 3,72,000
ByBalancec/d 5,300 87,00010,23,350 9,27,700 10,23,350 9,27,700
(vi) Statement of Affairs as on 31-12-2015
Liabilities ` Assets `
SundryCreditors 40,000 Inventory 1,10,000BillsPayable 12,000 Debtors 70,000Capital(Balancingfigure) 2,38,200 Billsreceivable 15,000
CashatBank 90,000CashinHand 5,200
2,90,200 2,90,200
© The Institute of Chartered Accountants of India
14.36 ACCOUNTING
ILLUSTRATION 9
Ms. Rashmi furnishes you with the following information relating to her business:
(a) Assets and liabilities as on 1.1.2016 31.12.2016
` `
Furniture(w.d.v) 12,000 12,700Inventoryatcost 16,000 14,000SundryDebtors 32,000 ?SundryCreditors 22,000 30,000Prepaid expenses 1,200 1,400Unpaid expenses 4,000 3,600Cashinhandandatbank 2,400 1,250
(b)Receiptsandpaymentsduring2016: Collections from debtors, after allowing discount of ` 3,000 amounted to
`1,17,000. Collectionsondiscountingofbillsofexchange,afterdeductionofdiscountof
`250bythebank,totalledto`12,250. Creditorsof`80,000werepaid`78,400infullsettlementoftheirdues. Paymentforfreightinwards`6,000. Amountwithdrawnforpersonaluse`14,000. Paymentforofficefurniture`2,000. Investmentcarryingannualinterestof4%werepurchasedat`192(facevalue
`200)on1stJuly,2016andpaymentmadetherefor. Expenses including salaries paid `29,000. Miscellaneous receipts `1,000. (c) Billsofexchangedrawnonandacceptedbycustomersduringtheyearamounted
to `20,000.Ofthese,billsofexchangeof`4,000wereendorsedinfavourofcreditors.Anendorsedbillofexchangeof`800wasdishonoured.
(d) Goodscosting`1,800wereusedasadvertisingmaterials. (e)Goodsareinvariablysoldtoshowagrossprofitof33-1/3%onsales. (f) Differenceincashbook,ifany,istobetreatedasfurtherdrawingorintroduction
ofcapitalbyMs.Rashmi. (g) Provideat2.5%fordoubtfuldebtsonclosingdebtors.Rashmiasksyoutopreparetradingandprofitandlossaccountfortheyearended31stDecember,2016andthebalancesheetasonthatdate.
© The Institute of Chartered Accountants of India
ACCOUNTS FROM INCOMPLETE RECORDS 14.37
Solution: Trading and Profit and Loss Account of Ms. Rashmi for the year ended 31st December, 2016
` `
ToOpeningInventory 16,000 BySales(W.N.3) 1,46,100ToPurchases(W.N.2) 91,200 ByClosing
inventory14,000
Less:Foradvertising (1,800) 89,400 To Freight inwards 6,000 ToGrossprofitc/d@33-1/3% 48,700 1,60,100 1,60,100ToSundryexpenses(W.N.6) 28,400 ByGrossprofitb/d 48,700ToAdvertisement 1,800 ByIntereston
ToDiscountallowed:Debtors 3,000investment(200x4/100x½)
4
BillsReceivable 250 3,250 ByDiscountreceived
1,600
ToDepreciationonfurniture(12,000+2,000–12,700)
1,300 ByMiscellaneousincome
1,000
ToProvisionfordoubtfuldebts 972ToNetProfit(b.f.) 15,582 51,304 51,304
Balance Sheet as on 31st December, 2016
Liabilities Amount Assets Amount` ` ` `
Capital as on 1.1.2016(W.N.1)
37,600 Furniture(w.d.v.) Additions during the
12,000
Less:Drawings (15,808) Year 2,000 21,792 Less:Depreciation(b.f.) (1,300) 12,700Add:NetProfit 15,582 37,374 Investment 192Sundrycreditors 30,000 Interestaccrued(200x
4%x6/12)4
Outstanding expenses
3,600 ClosingInventory 14,000
© The Institute of Chartered Accountants of India
14.38 ACCOUNTING
Sundrydebtors 38,900Less:Provisionfor [email protected]% 972 37,928Billsreceivable(W.N.7) 3,500Cash in hand and at bank
1,250
Prepaid expenses 1,400 70,974 70,974
Working Notes :(1) Capital on 1st January, 2016 Balance Sheet As On 1st January, 2016
Liabilities ` Assets `
Capital(Bal.fig.) 37,600 Furniture(w.d.v.) 12,000Creditors 22,000 Inventoryatcost 16,000Outstanding expenses 4,000 Sundrydebtors 32,000
Cashinhandandatbank 2,400Prepaid expenses 1,200
63,600 63,600(2) Purchases made during the year
Sundry Creditors Account` `
ToCashandbankA/c 78,400 ByBalanceb/d 22,000ToDiscountreceivedA/c(80,000–78,400)
1,600 BySundrydebtorsA/c 800
ToBillsReceivableA/c 4,000 ByPurchasesA/c 91,200ToBalancec/d 30,000 (Balancingfigure)
1,14,000 1,14,000
(3) Sales made during the year
`
Openinginventory 16,000Purchases 91,200Less:Foradvertising (1,800) 89,400Freight inwards 6,000
© The Institute of Chartered Accountants of India
ACCOUNTS FROM INCOMPLETE RECORDS 14.39
1,11,400Less:Closinginventory (14,000)Costofgoodssold 97,400Add:Grossprofit(@50%oncost) 48,700
1,46,100
(4) Debtors on 31st December, 2016 Sundry Debtors Account
` `
ToBalanceb/d 32,000 ByCashandbankA/c 1,17,000ToSalesA/c(W.N.3) 1,46,100 ByDiscountallowedA/c 3,000ToSundrycreditorsA/c ByBillsreceivableA/c 20,000(billdishonored) 800 ByBalancec/d(Bal.fig.) 38,900
1,78,900 1,78,900
(5) Additional drawings by Ms. Rashmi Cash and Bank Account
` `
ToBalanceb/d 2,400 ByFreightinwardsA/c 6,000ToSundrydebtorsA/c 1,17,000 ByFurnitureA/c 2,000ToBillsReceivableA/c 12,250 ByInvestmentA/c 192ToMiscellaneousincomeA/c 1,000 ByExpensesA/c 29,000
ByCreditorsA/c 78,400ByDrawingsA/c 15,808
[`14,000+`1,808(b.f.)(Additionaldrawings)]
ByBalancec/d 1,2501,32,650 1,32,650
(6) Amount of expenses debited to Profit and Loss A/c Sundry Expenses Account
` `
ToPrepaidexpensesA/c(on1.1.2016)
1,200 ByOutstandingexpensesA/c(on1.1.2016)
4,000
ToBankA/c 29,000 ByProfitandLossA/c(Balancingfigure)
28,400
ToOutstandingexpensesA/c(on31.12.2016)
3,600 ByPrepaidexpensesA/c 1,400
33,800 33,800
© The Institute of Chartered Accountants of India
14.40 ACCOUNTING
(7) Bills Receivable on 31st December, 2016 Bills Receivable Account
` `
ToDebtorsA/c 20,000 ByCreditorsA/c 4,000ByBankA/c 12,250ByDiscountonbillsreceivableA/c 250ByBalancec/d(Balancingfigure) 3,500
20,000 20,000
SUMMARY
• Single entry system is generally found in sole trading concerns or even inpartnershipfirmstosomeextentbutneverincaseoflimitedliabilitycompaniesonaccountoflegalrequirements.
• Therearebasically3typesofsingleentrysystems: i. PureSingleEntry ii. SimpleSingleEntry iii. QuasiSingleEntry• Singleentrysystemignorestheconceptofdualityandtherefore,transactionsarenotrecordedintheirtwo-foldaspects.
TEST YOUR KNOWLEDGE
MCQs 1.Incaseofnetworthmethod,profitisdeterminedby (a) Preparingatradingandprofitandlossaccount. (b) Comparingthecapital inthebeginningwiththecapitalattheendofthe
accountingperiod. (c) Comparingthenetassetsinthebeginningwiththenetassetsattheendof
theaccountingperiod. 2. Singleentrysystemcanbefollowedby (a)Smallfirms. (b)Jointstockcompanies. (c)Co-operativesocieties.
© The Institute of Chartered Accountants of India
ACCOUNTS FROM INCOMPLETE RECORDS 14.41
3. Closingcapitaliscalculatedas (a)Openingcapital+Additionalcapital-Drawings. (b)Openingcapital+Additionalcapital–Drawings+Profit. (c) Openingcapital+Additionalcapital+Drawings-Profit. 4. Undersingleentrysystem,onlypersonalaccountsarekeptandinsomecases (a)Cashbookismaintained; (b)Fixedassets’accountsaremaintained; (c)Liabilities’accountsaremaintained. 5. TheclosingcapitalofMr.Bason31.3.2016was` 4,00,000. On1.4.2015his
capital was ̀ 3,50,000.Hisnetprofitfortheyearended31.3.2016was̀ 1,00,000.He introduced` 30,000asadditional capital inFebruary,2016. Findout theamountdrawnbyMr.Bforhisdomesticexpenses.
(a)` 1,00,000; (b)` 80,000; (c) ` 1,20,000;
Theoretical Questions1. WhatismeantbySingleentrySystem?Whatarethetypesofproceduresadopted
forthissystem?
Practical QuestionsQUESTION 1A company sold 20%of the goods on cash basis and the balance on credit basis.Debtorsareallowed1½month’screditandtheirbalanceason31.03.2016is̀ 1,25,000.Assumethatthesaleisuniformthroughouttheyear.Calculatethecreditsalesandtotalsalesofthecompanyfortheyearended31.03.2016.QUESTION 2The following is the Balance Sheet of the retail business of Sri Srinivas as at 31stDecember,2015:
Liabilities ` Assets `
SriSrinivas’scapital 1,00,000 Furniture 10,000Liabilitiesforgoods 20,500 Stock 70,000Rent 1,000 Debtors 25,000
Cashatbank 14,500Cash in hand 2,000
1,21,500 1,21,500
© The Institute of Chartered Accountants of India
14.42 ACCOUNTING
Youarefurnishedwiththefollowinginformation: (1) SriSrinivassellshisgoodsataprofitof20%onsales. (2) Goodsaresoldforcashandcredit.Creditcustomerspaybychequesonly. (3) Paymentsforpurchasesarealwaysmadebycheques. (4) ItisthepracticeofSriSrinivastosendtothebankeveryweekendthecollectionsof
theweekafterpayingeveryweek,salaryof̀ 300totheclerk,Sundryexpensesof ` 50andpersonalexpenses` 100.
Analysis of the Bank Pass–Book for the 13weeks period ending 31stMarch, 2016disclosedthefollowing:
`
Paymentstocreditors 75,000Paymentsofrentupto31.3.2016 4,000Amountsdepositedintothebank 1,25,000(include` 30,000receivedfromdebtorsbycheques)Thefollowingarethebalanceson31stMarch,2016: `
Stock 40,000Debtors 30,000Creditorsforgoods 36,500
Ontheeveningof31stMarch,2016theCashierabscondedwiththeavailablecashinthecashbox.Therewasnocashdepositintheweekendedonthatdate.YouarerequiredtoprepareastatementshowingtheamountofcashdefalcatedbytheCashierandalsoaProfitandLossAccountfortheperiodended31stMarch,2016andaBalanceSheetasonthatdate.QUESTION 3Mr.Arunsabusinessofreadymadegarments.Heclosesthebooksofaccountson31stMarch.TheBalanceSheetason31stMarch,2016wasasfollows:
Liabilities ` Assets `
A’scapitala/c 4,04,000 Furniture 40,000Creditors 82,000 Stock 2,80,000
Debtors 1,00,000Cash in hand 28,000Cashatbank 38,000
4,86,000 4,86,000
Youarefurnishedwiththefollowinginformation: (1) Hissales,fortheyearended31stMarch,2017were20%higherthanthesalesof
previousyear,outofwhich20%saleswascashsales. Totalsalesduringtheyear2015-16were` 5,00,000.
© The Institute of Chartered Accountants of India
ACCOUNTS FROM INCOMPLETE RECORDS 14.43
(2) Paymentsforallthepurchasesweremadebychequesonly. (3) Goodsweresoldforcashandcreditboth.Creditcustomerspaybechequesonly. (4) Deprecitiononfurnitureistobecharged10%p.a. (5)Mr.Asenttothebankthecollectionofthemonthatthelastdateoftheeach
monthafterpayingsalaryof`2,000 to theclerk,officeexpenses`1,200andpersonal expenses `500.
Analysisofbankpassbookfortheyearending31stMarch2017disclosedthefollowing:
`
Paymenttocreditors 3,00,000Paymentofrentupto31stMarch,2017 16,000Cashdepositedintothebankduringtheyear 80,000
Thefollowingarethebalanceson31stMarch,2017:
`
Stock 1,60,000Debtors 1,20,000Creditorsforgoods 1,46,000Ontheeveningof31stMarch2017,thecashierabscondedwiththeavailablecashinthecashbook.YouarerequiredtoprepareTradingandProfitandLossA/cfortheyearended31stMarch,2017andBalanceSheetasonthatdate.Alltheworkingsshouldformpartoftheanswer.QUESTION 4Atraderkeepshisbooksofaccountundersingleentrysystem.On31stMarch,2015hisstatementofaffairsstoodasfollows:
Liabilities ` Assets ` Trade Creditors 5,80,000 Furniture,FixturesandFittings 1,00,000BillsPayable 1,25,000 Stock 6,10,000Outstanding Expenses 45,000 TradeDebtors 1,48,000Capital Account 2,50,000 BillsReceivable 60,000
Unexpired Insurance 2,000CashinHandandatBank 80,000
10,00,000 10,00,000
© The Institute of Chartered Accountants of India
14.44 ACCOUNTING
ThefollowingwasthesummaryofCash–bookfortheyearended31stMarch,2016:
Receipts ` Payments ` CashinHandandatBankon1stApril,2016
PaymentstoTradeCreditors
75,07,000
80,000 PaymentsforBillspayable 8,15,000Cash Sales 73,80,000 SundryExpensespaid 6,20,700ReceiptsfromTradeDebtors 15,10,000 Drawings 2,40,000ReceiptsforBillsReceivable 3,40,000 CashinHandandatBank
on31stMarch,2016 1,27,30093,10,000 93,10,000
Discount allowed to trade debtors and received from trade creditors amounted to `36,000and`28,000respectively.Billsendorsedamountedto`15,000.AnnualFireInsurancepremiumof`6,000waspaideveryyearon1stAugustfortherenewalofthepolicy.Furniture,fixturesandfittingsweresubjecttodepreciation@15%perannumondiminishingbalancesmethod.Youarealsoinformedaboutthefollowingbalancesason31stMarch,2016:
`
Stock 6,50,000TradeDebtors 1,52,000BillsReceivable 75,000BillsPayable 1,40,000Outstanding Expenses 5,000
Thetradermaintainsasteadygrossprofitratioof10%onsales.
PrepareTradingandProfitandLossAccountfortheyearended31stMarch,2016andBalanceSheetasatthatdate.QUESTION 5
ThefollowingistheBalanceSheetofaconcernon31stMarch,2015:
` `
Capital 10,00,000 Fixed Assets 4,00,000Creditors(Trade) 1,40,000 Stock 3,00,000Profit&LossA/c 60,000 Debtors 1,50,000
Cash&Bank 3,50,000
© The Institute of Chartered Accountants of India
ACCOUNTS FROM INCOMPLETE RECORDS 14.45
12,00,000 12,00,000
Themanagementestimatesthepurchasesandsalesfortheyearended31stMarch,2016asunder:
upto 28.2.2016 ` March 2016 ` Purchases 14,10,000 1,10,000Sales 19,20,000 2,00,000
It was decided to invest `1,00,000inpurchasesoffixedassets,whicharedepreciated@10%oncost.
ThetimelagforpaymenttoTradeCreditorsforpurchaseandreceiptfromSalesisonemonth.Thebusinessearnsagrossprofitof30%onturnover.Theexpensesagainstgrossprofitamountto10%oftheturnover.Theamountofdepreciationisnotincludedintheseexpenses.
Draft aBalanceSheet as at 31stMarch, 2016assuming that creditors are all TradeCreditors forpurchasesanddebtors for salesand there isnoother itemofcurrentassetsand liabilitiesapart fromstockandcashandbankbalances.Assume thatallsalesandpurchasesareoncreditbasis.
ANSWERS/ HINTSMCQs
1. (b) 2. (a) 3. (b) 4. (a) 5. (b)
Theoretical Questions1.Singleentrysystemisaninaccurateandunsystematicmethodofrecordingbusinesstransactions.Theproceduresadoptedare:Puresingleentry;SimpleentryandQueasysingleentry.Fordetails,ReferPara1and2ofthechapter.Solutions to the Practical questionsAnswer 1 CalculationofCreditSalesandTotalsales
CreditSalesfortheyearended2015-16=Debtors× 1.5months12months
= ` 1,25,000× 1.5months12months
= `10,00,000
© The Institute of Chartered Accountants of India
14.46 ACCOUNTING
Totalsalesfortheyearended2015-16 =Creditsalesx 80%100%
= `10,00,000x 80%100%
= `12,50,000Answer 2
Statement showing the amount of cash defalcated by the Cashier
` `
Cashbalanceason1.1.2016Add:Cashsales(W.N.2andW.N.4)Less:Salarytoclerk(`300×13)Sundryexpenses(`50×13)DrawingsofSriSrinivas(`100×13)Depositintobank(`1,25,000–̀ 30,000)Cashbalanceason31.3.2016(defalcatedbycashier)
2,0001,16,2503,900650
1,30095,000
1,18,250
(1,00,850)17,400
Trading and Profit and Loss Account of Sri Srinivasfor the 13 week period ended 31st March, 2016
` ` `
ToOpeningstockTo PurchasesToGrossProfitc/d
ToSalaries(300x13)ToRent(̀ 4,000–̀ 1,000)ToSundryExpenses(50x13)ToLossofcashbytheftToNetProfit(b.f.)
70,00091,00030,250
191,2503,9003,000650
17,4005,30030,250
BySales:Cash(W.N.2&W.N.4)Credit(W.N.3)ByClosingstock
ByGrossprofitb/d
1,16,250
35,000 1,51,25040,000
1,91,25030,250
30,250
© The Institute of Chartered Accountants of India
ACCOUNTS FROM INCOMPLETE RECORDS 14.47
Balance Sheet of Sri Srinivasas on 31st March, 2016
Liabilities ` Assets `
Capitalason1.1.2016Add:Profit
Less:DrawingsLiabilitiesforgoods
1,00,0005,300
1,05,300 (1,300) 1,04,000
36,5001,40,500
FurnitureStockDebtorsCashatbank
10,00040,00030,00060,500
1,40,500
Working Notes 1. Purchases
Creditors Account` `
ToBankA/cToBalancec/d
75,00036,500
1,11,500
ByBalanceb/dByPurchasesA/c(Bal.fig.)
20,50091,000
1,11,500
2. Total sales
`
Opening StockAdd:Purchases
Less:ClosingstockCost of Goods SoldAdd:Grossprofit@25%oncostTotal Sales
70,00091,000
1,61,000(40,000)1,21,00030,250
1,51,250
© The Institute of Chartered Accountants of India
14.48 ACCOUNTING
3. Credit Sales
Debtors Account
` `
ToBalanceb/dToSalesA/c(Bal.fig.)
25,00035,00060,000
ByBankA/cByBalancec/d
30,00030,00060,000
4. Cash Sales
`
Total salesLess:CreditSalesCash sales
1,51,250(35,000)1,16,250
5. Bank balance as on 31.3.2016
` `
ToBalanceb/dToDebtorsA/cToCashA/c(1,25,000–30,000)
14,50030,00095,000
1,39,500
ByCreditorsA/cByRentA/cByBalancec/d(b.f.)
75,0004,00060,500
1,39,500
Notes : 1. Allpurchasesaretakenoncreditbasis. 2. Intheabsenceofinformationabouttherateofdepreciation,nodepreciationhas
beenchargedonfurniture. 3. Theamountdefalcatedbythecashiermaybetreatedasrecoverablefromhim.
Inthatcase,`17,400maybeshownassundryadvancesonassetssideintheBalanceSheetandnetprofit for the13weekperiodending31stMarch,2016wouldamount`22,700.
© The Institute of Chartered Accountants of India
ACCOUNTS FROM INCOMPLETE RECORDS 14.49
Answer 3Trading and Profit and Loss Account for the year ending 31st March 2016
Particulars ` Particulars `
ToOpeningstockToPurchases(W.N.1)ToGrossprofit(b.f.)
ToSalary(2,000x12)To RentToOfficeexpenses(1,200x12)ToLossofcash(W.N.6)ToDepreciationonfurnitureToNetProfit(b.f.)
2,80,0003,64,0001,16,000
7,60,00024,00016,00014,40023,6004,00034,000
1,16,000
BySales(W.N.3) Credit 4,80,000 Cash 1,20,000ByClosingstock
ByGrossprofit
6,00,0001,60,0007,60,0001,16,000
1,16,000
Balance Sheet as on 31st March, 2016Liabilities ` Assets `
A’sCapital 4,04,000Add:NetProfit 34,000Less:Drawings(500x12)(6,000)Creditors
4,32,0001,46,000
5,78,000
Furniture 40,000Less:Depreciation (4,000)StockDebtorsCashatbank
36,0001,60,0001,20,0002,62,0005,78,000
Working Notes 1. Calculation of purchases
Creditors AccountParticulars ` Particulars `
ToBankA/cToBalancec/d
3,00,0001,46,0004,46,000
ByBalanceb/dByPurchasesA/c(Bal.fig.)
82,0003,64,0004,46,000
© The Institute of Chartered Accountants of India
14.50 ACCOUNTING
2. Calculation of total sales
`
Salesfortheyear2015-16Add:20%increaseTotalsalesfortheyear2016-17
5,00,0001,00,0006,00,000
3. Calculation of credit sales
`
Total salesLess:Cashsales(20%oftotalsales)
6,00,000(1,20,000)4,80,000
4. Calculation of cash collected from debtorsDebtors Account
Particulars ` Particulars `
ToBalanceb/dToSalesA/c
1,00,0004,80,0005,80,000
ByBankA/c(Bal.fig.)ByBalancec/d
4,60,0001,20,0005,80,000
5. Calculation of closing balance of cash at bankBank Account
Particulars ` Particulars `
ToBalanceb/dToDebtorsA/cToCashA/c
38,0004,60,00080,000
5,78,000
ByCreditorsA/cByRentA/cByBalancec/d(b.f.)
3,00,00016,000
2,62,0005,78,000
6. Calculation of amount of cash defalcated by the cashier` `
Cashbalanceason1stApril2016Add: Cashsalesduringtheyear
Less: Salary(` 2,000x12) Officeexpenses(̀ 1,200x12) DrawingsofA(̀ 500x12) CashdepositedintobankduringtheyearCashbalanceason31stMarch2017(defalcatedbythecashier)
24,00014,4006,00080,000
28,0001,20,0001,48,000
(1,24,400)23,600
© The Institute of Chartered Accountants of India
ACCOUNTS FROM INCOMPLETE RECORDS 14.51
Answer 4Trading and Profit and Loss Accountfor the year ended 31st March, 2017
Particulars ` Particulars `
To To To
To To To
To
OpeningStockPurchases(W.N.3)Grossprofitc/d(10%of93,00,000)
Sundryexpenses(W.N.6)Discount allowedDepreciation(15%̀ 1,00,000)NetProfit(b.f.)
6,10,00084,10,0009,30,000
99,50,0005,80,70036,00015,000
3,26,3009,58,000
BySales CashCredit(W.N.2)ByClosingstock
ByGrossprofitb/dByDiscountreceived
73,80,00019,20,000
93,00,0006,50,00099,50,0009,30,00028,000
9,58,000
Balance Sheet as at 31st March, 2016
Liabilities Amount Assets Amount ` `
Capital Furniture&Fittings 1,00,000 Openingbalance 2,50,000 Less:Depreciation (15,000) 85,000 Less:Drawing (2,40,000) Stock 6,50,000 10,000 TradeDebtors 1,52,000 Add:Netprofitfortheyears 3,26,300 3,36,300 Billsreceivable 75,000 Billspayable 1,40,000 Unexpiredinsurance 2,000 Tradecreditors 6,10,000 Cashinhand&atbank 1,27,300 Outstandingexpenses 5,000 10,91,300 10,91,300
Working Notes 1. Bills Receivable Account
` `
ToBalanceb/d 60,000 ByCash 3,40,000 ToTradedebtors(b.f.) 3,70,000 ByTradecreditors 15,000 (Billsendorsed) ByBalancec/d 75,000 4,30,000 4,30,000
© The Institute of Chartered Accountants of India
14.52 ACCOUNTING
2. Trade Debtors Account
` `
ToBalanceb/d 1,48,000 ByCash/Bank 15,10,000 ToCreditsales 19,20,000 ByDiscountallowed 36,000 (Bal.fig.) ByBillsreceivable 3,70,000 ByBalancec/d 1,52,000 20,68,000 20,68,000
3. Memorandum Trading Account
` `
ToOpeningstock 6,10,000 BySales 93,00,000 ToPurchases(Balancingfigure) 84,10,000 ByClosingstock 6,50,000 ToGrossProfit(10%onsales) 9,30,000 99,50,000 99,50,000
4. Bills Payable Account
` `
ToCash/Bank 8,15,000 ByBalanceb/d 1,25,000 ToBalancec/d 1,40,000 ByCreditors(balancingfigure) 8,30,000 9,55,000 9,55,000
5. Trade Creditors Account
` `
ToCash/Bank 75,07,000 ByBalanceb/d 5,80,000 ToDiscountreceived 28,000 ByPurchases(ascalculated 84,10,000 ToBillsreceivable 15,000 inW.N.3) ToBillspayable 8,30,000 ToBalancec/d(balancingfigure) 6,10,000 89,90,000 89,90,000
© The Institute of Chartered Accountants of India
ACCOUNTS FROM INCOMPLETE RECORDS 14.53
6. Computation of sundry expenses to be charged to Profit & Loss A/c`
Sundryexpensespaid(aspercashbook)Add:Prepaidexpensesason31–3–2015
Less:Outstandingexpensesason31–3–2015
Add:Outstandingexpensesason31–3–2016
Less:Prepaidexpensesason31–3–2016(InsurancepaidtillJuly,2016)(6,000x4/12)
6,20,7002,000
6,22,700(45,000)5,77,7005,000
5,82,700(2,000)
5,80,700
Answer 5Projected Balance Sheet of ......
as on 31st March, 2016
Liabilities ` Assets `
Capital 10,00,000 FixedAssets 4,00,000 Profit&LossAccountason Additions 1,00,000 1stApril,2015 60,000 5,00,000 Add:Profitfortheyear 3,74,000 4,34,000 Less:Depreciation@10% (50,000) 4,50,000 Creditors(Trade) 1,10,000 Stockintrade 3,36,000 SundryDebtors 2,00,000 Cash&BankBalances(workingnote) 5,58,000 15,44,000 15,44,000
Working Notes 1. Projected Trading and Profit and Loss Account
for the year ended 31st March, 2016
Particulars ` Particulars `
ToOpeningStockTo PurchasesToGrossProfitc/d(30%onsales)
ToSundryExpenses(10%onsales)To DepreciationToNetProfit(b.f.)
3,00,00015,20,0006,36,00024,56,0002,12,00050,000
3,74,0006,36,000
BySalesByClosingStock(balancingfigure)
ByGrossProfitb/d
21,20,0003,36,000
24,56,0006,36,000
6,36,000
© The Institute of Chartered Accountants of India
14.54 ACCOUNTING
2. Cash and Bank Account1st April, 2015 to 31st March, 2016
Particulars ` Particulars `
To To
Balanceb/dSundryDebtors(`1,50,000+̀ 19,20,000)
3,50,00020,70,000
24,20,000
BySundryCreditors(`1,40,000+̀ 14,10,000)ByExpensesByFixedAssetsByBalancec/d(b.f.)
15,50,000
2,12,0001,00,0005,58,00024,20,000
© The Institute of Chartered Accountants of India