lecture - 03
TRANSCRIPT
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Advanced Financial Accounting
FIN-611 Mian Ahmad Farhan
Lecture-3Single Entry
(Conversion Method)
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Necessary Documents Required in Conversion Method
1. Cash book 2. Total Debtors account 3. Total Creditors account 4. Statement of affairs relating to
opening date 5. Year end adjustment
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Cash Book
Receipts Amount Payment Amount
Opening balance
All receipts either relating capital or revenue receipts
xxx
xxx
All payments either relating capital or revenue payments
Closing balance
xxx
xxx
xxx xxx
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Debtors Account
Increase in Debtors
Amount
Decrease in Debtors
Amount
Opening balance
Credit sales
xxx
xxx
Cash received from debtorsDiscount allowedBad debts Sales return Closing balance
xxxxxxxxxxxxxxx
xxx xxx
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Creditors Account
Decrease in Creditors
Amount
Increase in Creditors
Amount
Cash paid to creditors Discount received Purchase return Closing balance
xxxxxxxxxxxx
Opening balance Credit purchase
xxxxxx
xxx xxx
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Debit (Dr) and Credit (Cr) Rules
Debit (Dr) group
Assets Expenses
Credit (Cr) group
Owner’s equityLiabilityIncome
Increase Dr. Decrease Cr.
Increase Cr.
Decrease Dr.
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Statement of Affairs It consists of previous year “Balance Sheet” items
Assets Amount (Rs)
Liabilities Amount (Rs)
Furniture & FixtureEquipmentsStockDebtorsPrepaid expensesBank balance Cash
xxxxxxxxxxxxxxxxxxxxx
Loan CreditorsPayable expensesOwner’s equity/Net Assets (Balancing figure)
xxxxxxxxxxxxxxx
xxx xxx
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Year End Adjustments
It includes various adjustments relating to previous year.
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Company Name Income Statement
For the year ended -------
Sales xxxLess Cost of goods sold
Opening Stock xxxAdd Purchases xxxLess Closing Stock xxx
xxxxxx
Less Operating expenses xxxAdd Other Income xxxGross Profit xxx
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Sales Sales
Cash Sales Credit Sales Journal Entry
Debtors xxxSale xxx
Journal Entry Cash xxx
Sale xxx
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Cash Book
Receipts Amount Payment Amount
Cash received from debtors
xxx
xxx xxx
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Debtors Account
Increase in Debtors
Amount
Decrease in Debtors
Amount
Credit sales xxx Cash received from debtors
xxx
xxx xxx
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Purchases
Purchases
Cash Purchase
Credit Purchase
Journal Entry Creditors xxx Purchase xxx
Journal Entry Purchase xxx
Cash xxx
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Cash Book
Receipts Amount Payment Amount
Cash purchases xxx
xxx xxx
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Creditors Account
Decrease in Creditors
Amount
Increase in Creditors
Amount
Credit purchase xxx
xxx xxx
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Closing Stock
Closing stock information is available at year end balance sheet.
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Operating Expenses
1. Cash based expenses 2. Expenses relating to receivables 3. Expenses relating to fixed assets
a). Depreciation b). Loss on disposal of an
assets
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Cash Book
Receipts Amount Payment Amount
Expenses paid in cash xxx
xxx xxx
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Cash Based Expenses
Expenses paid in cash during the year xxx
Less Opening balance of Accrued expenses xxxAdd Closing balance of Accrued expenses xxxAdd Opening balance of Prepaid expenses xxx
Less Closing balance of Prepaid expenses xxxxxx
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Expenses Related to Receivable
1. Discount Allowed2. Bad debts 3. Provision for doubtful debts
Debtors account
Year end adjustment
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Provision for Doubtful Debts1. When there is an increase in Provision it will
be charged as an expense. 2. When there is an decrease in Provision it will
becredited to the expense.
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Operating Expenses
1. Cash based expenses 2. Expenses relating to receivables 3. Expenses relating to fixed assets
a). Depreciation b). Loss on disposal of an assets
Cash Account Debtors Account & Year end adjustment
Year end adjustment Cash Account
& Year end adjustment
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Other Income
1. Incomes based on cash2. Incomes relating to payables 3. Incomes relating to fixed assets
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Incomes Based on Cash
Cash received during the year xxxLess Opening balance of Accrued income xxxAdd Closing balance of Accrued income
xxxAdd Opening balance of advance income xxx
Less Closing balance of advance income xxx
xxx
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Incomes Relating to Payables
Discount received Journal Entry Creditors xxx Income xxx
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Income Relating to Fixed Assets
Profit on disposal of an Assets.