double Entry System

Single Entry System Incomplete Records Question Answer

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What is Single Entry System? “Single Entry system is a method or a variety of methods, employed for the recording of transactions, which ignore the two-fold aspect and consequently fails to provide the businessman with the information necessary for him to be able to ascertain the position.” Kohler defines it as:“A system of book -keeping -keeping in which, as a rule, only records of cash and of personal accounts are maintained; it is always incomplete double entry system, varying with circumstances.” The term “Single Entry System” is popularly used to d escribe the problems of accounts from incomplete records. In fact there is no accountants follow some hybrid methods. For some transactions they complete double entries. For some others they just maintain one entry. Still for some others, they even do not pass any entry, this is no system of accounting. Briefly, this may be stated as incomplete record s. The task of accountant is to establish linkage among the available information & to finalise the accounts. What are the features of Single Entry Systems? Following are the features of a single entry system: 1. Content: This system is a mixture of; (i) double entry; (ii) Single entry; and (iii) No entry. 2. Suitability: This system is suitable for small businesses where the proprietors or partners can directly control the affairs of the business. 3. Accounts kept: In this system, generally personal accounts are kept but real & nominal accounts are ignored. This is because, a single entry takes account only of the personal transactions & leaves the impersonal transactions of the business unit entirely unrecorded. 4. Absence of two fold aspect: In the absence of record of the two  –   fold aspect of every transaction, it is not possible to prepare a trial balance & check the arithmetical accuracy of the books of account. Similarly, no balance sheet can be prepared in the absence of balances in ledger. 5. Flexibility: This system is highly changeable & flexible & it is not governed by any definite rules of operation. 6. Profit & Loss: Under this system the profit or loss can be found out but its composition will not be available. What are the advantage of single entry system? Following are the advantage of a single entry system: 1. It is a very simple method 2. It is less expensive 3. It is mainly suited to small business. 4. It does not require any adequate knowledge of the principles of book-keeping. What are the disadvantage of single entry system? (1) Preparation of Trial Balance not possible: The method does not record both the aspects of a transaction. As such, a trial balance cannot be prepared to check the arithmetical accuracy of the books of accounts. This increases the possibility of frauds and misappropriations. (2) Incomplete and Unscientific System: The system is incomplete and unscientific due to the fact  both the aspects, debit and credit of a transaction are recorded. Also, no set rules are followed under this method. (3) True Profit or Loss cannot be ascertained: Because nominal accounts are not maintained, a Trading and Profit and Loss Account cannot be prepared and hence, the profit earned or loss suffered during a particular period cannot be ascertained with reasonable accuracy. (4) Difficulty in preparing Balance Sheet: Since real accounts are not maintained, Balance Sheet cannot be prepared to depict the true financial position of the business. Only a statement of affairs is prepared where in the value of assets and liabilities is written on estimated basis. (5)  No Control on Assets: Since real accounts are not maintained, it is no t possible to keep full control on the assets and as such, the changes o f misappropriation of assets cannot be avoided. (6)  No recognition in the assessment of Income Tax and Sales Tax: The system fails to reveal the true profit and sales of a business. As such, the accounts maintained under the system are not accepted by tax authorities. (7) Unsuitable for Planning and Control: The system fails to provide the adequate and reliable figures required for planning and sound decision-making.

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(8) Difficulty in Comparative Study: Due to incomplete information, the profitability and the financial position of the current year cannot be compared with that of the previous year and as such, it becomes quite difficult to know the reasons of improving or deteriorating profitability and financial position of the business. (9) Proper valuation of assets not possible at the time of sale of business: It becomes very difficult to fix the correct price of assets, specially goodwill, at the time of sale of the bu siness. (10) Internal Check not possible: Because of lack of double entry principles, internal checking is not possible and hence there are always the chances of errors and frauds. Also, it becomes very difficult to detect them. Due to the above mentioned defects the system is known as incomplete, unscientific and unreliable. Differentiate between Balance Sheet and Statement of Affairs. Basis of Difference Balance Sheet Statement of Affairs Double or single entry It is prepared on the basis of It is prepared on the basis of those books which are kept on those books which are partly double entry. kept on the basis of double entry and partly on the basis of single entry. It is prepared only on the It is prepared on the basis of (I) Basis of preparation  balances of accounts.  balances of accounts, (ii) valuation, (iii) calculation, (iv) information and inquiry. Trial Balance is not prepared Trial Balance is prepared  before preparation of Final Trial Balance  before preparation of Final Accounts. Accounts. Capital Account is not  prepared. Excess of assets over Capital is taken from Capital liabilities is treated as capital. Capital Account in Ledger. Its object is to find out capital. Its object is to financial position.

Question Answer

find

out

Objects Differentiate between Double Entry System and Single Entry System Basis of Difference Double Entry System Single entry System Recording of Both Aspects Both the aspects of every Under this system, both the transaction are recorded in it. aspects of very few transactions are recorded. For some other transactions one aspect and yet for others no aspect at all is recorded. Type of Accounts All accounts  –   personal, real Only personal accounts and a and nominal are maintained cash book are maintained under under it. it. Trial Balance Arithmetical accuracy of the Arithmetical accuracy cannot  books of accounts can be  be checked in it because a trial checked in it by preparing a  balance cannot be prepared. trial balance. True profit or loss cannot be  Net Profit or Loss True financial position is ascertained because a Balance ascertained by preparing a Sheet cannot be prepared. Only Balance Sheet. a statement of affairs is  prepared based on incomplete accounts and estimates.  No adjustments are made under this system because of incompleteness of a/cs. Adjustments Under this system, adjustments Books maintained under this are made while preparing final system are not accepted as accounts. evidence in the court of law. Books maintained under this This method is suitable only Proof system are accepted as for small size business where evidence in the court of law. the number of transactions is This method is suitable for all less and that too mostly of cash

Suitability

Reliability

types of business, small or large.

nature. Books maintained under this system are less reliable because they are based on estimates.

Books maintained under this system are reliable because they are based on scientific  principles.

Que. 1- Mr. Y provides you the following information: (a) Opening and Closing Balances: Particulars

Cash in hand Bank Balance Debtors Creditors Stock

1.4.20X1 Rs.

31.3.20X2 Rs.

150 30,000 100,000 90,000 15,000

21,000 1,25,000 1,00,000 25,000

(b) Analysis of Pass Book revealed the following: Withdrawals for petty Cash Expenses Rs. 1,500 p.m. Collection from Debtors Rs. 1,35,000 (c) Uniform Sales Price being Cost + 33-1/3% (d) Any difference in Cash Account and Bank Account may be treated as personal drawings of Mr. Y. (e) Petty Cash Expenses during the year Rs. 17,850 (f) All Purchases were made on credit only and were paid by cheques only. (g) All Sales were effected on credit basis only and were collected by cheques only. st Required: Prepare the Trading and Profit & Loss Account for the year ending 31  March, 20X2 and the Balance Sheet as on that date. Que. 2 - Mr. X provides you the following information: (a) Opening and Closing Balances: Particulars

1.4.20X1

Rs.

31.3.20X2

Rs.

Cash in hand 320 200 Bank Balance 2,500 (5,000) Debtors 20,000 30,000 Creditors 20,000 30,000 Stock 10,000 30,000 (b)  Analysis of Pass –  Book revealed the following: Withdrawal for petty cash expenses Rs. 500 p.m. payment to creditors Rs. 20,000 (c) Uniform Gross Profit being 66-2 /3% on sales. (d) Any Difference in Cash Account and Bank Account may be treated as personal drawings of Mr. X. (e) Petty Cash Expenses during the year Rs. 5,920. (f) All Purchases were made on credit only and were paid by cheques only. (g) All sales were effected on credit basis only and were collected by cheques only. You are required to prepare the Trading and Profit & Loss Account for the year endin g 31st March 20X2 and the Balance Sheet as on that date Que. 3- Mr. Ramji (India) keeps his single entry system. From the following, prepare Trading and Profit and Loss Account for the year ended 31.3.20X2 together with Balance Sheet as on that date. Cash book analysis shows the following:

Rs. 100 2,000 8,500 7,900 15,000

Interest charges Personal withdrawals Staff salaries Other business expenses Payments to creditors

Rs. 2,425 75 25,000 15,000

Balance at bank on 31.3.20X2 Cash in hand as on 31.3.20X2 Received from debtors Cash Sales

Further details available are: As on 1.4.20X1

As on 31.3.20X2

As on 1.4.20X1

As on

31.3.20X2 Rs. Rs. Rs. Rs. Stock on hand 9,000 10,220 Furniture 1,000 1,000 Creditors 8,000 5,500 Office premises 15,000 15,000 Debtors 22,000 30,000 Provide 5 per cent interest on X’s capital balance as on 1.4.20X1. Provide Rs. 1,500 fo r doubtful debts. 5 per cent depreciation on all fixed assets 5 per cent group incentive commission to staff has to be provided for on net profit after meeting all expenses and the commission. Que. 4-  X submits to you following figure relating to his business in respect of the year ending 31 st  March 20X2. You are required to prepare a Trading and Profit and Loss Account for the year ended and a Balance Sheet as at 31 st March 20X2. Any difference in the cash/Bank balance is assumed to be drawings:

Cash paid into bank Private dividends paid into bank Payment for goods out of Bank Cash received from debtors Payments for goods by cash and Cheques

Stock Bank Balance Cash in hand Trade Debtors Trade Creditors Investments

Rs. 1,50,000 Wages 2,000 Delivery Expenses 1,22,000 Rent & Rates 2,50,000 Lighting & Heating General expenses 1,60,000 The Assets and liabilities are as follows : 01.04.20X1 Rs. 20,000 8,000 300 14,000 27,300 50,000

Rs. 40,000 7,000 2,000 1,000 4,600

31.03.20X2 Rs. 15,000 12,000 400 20,000 30,000 50,000

Que. 5- Mr. X commenced business on 1 st April 20X1, with a capital of Rs. 45,000. He immediately purchased Furniture of Rs. 24,000. During the year he received from his uncle a gift of Rs. 3,000 and he borrowed from his father a sum of Rs. 5,000. He had withdrawn Rs. 600 per mon th for his household expenses. He h ad no Bank account and all dealings were in cash. He did not maintain any books but following information is given. Sales (including cash sales Rs. 30,000) 1,00,000, Purchases (including cash purchases Rs. 10,000) Rs. 75,000, Carriage Inwards Rs. 700, Wages Rs. 300, Discount allowed to Debtors Rs. 800, Salaries Rs. 6,200, Bad debts written off Rs. 1,500, Trade Expenses Rs. 1,200, Advertisement Rs. 2,200. He used goods worth Rs. 1,300 for personal purposes and paid Rs. 500 to his son for examination and co llege fees. On 31st March 20X2, his Debtors were worth Rs. 21,000 and Creditors Rs. 15,000. Stock in trade was valued at Rs. 10,000. Furniture to be depreciated by 10% p.a. Required: Prepare Trading and Profit and Loss Account for the year ended on 31st March 20X2 and Balance Sheet as at 31 st March 20X2. Que. 6- The books of X showed the following figures: 31.3.20X1

31.3.20X2

Rs. Rs. Cash in Hand 1,600 3,400 Cash at Bank 12,000 76,400 Stock in Trade 88,000 1,00,000 Sundry Debtors ? 1,40,000 Sundry Creditors 93,600 34,000 Furniture and Fixtures 8,000 Office Car 40,000 The Cash Book analysis showed the following figures amongst others: Receipts from customers Rs. 5,40,000, Discount allowed to customers Rs. 5,600, Further Capital introduced on 1.10.20X1 Rs. 8,000, Salaries Rs. 44,000, Office Rent Rs. 8,800, Advertising Rs. 3,600, General Expenses Rs. 2,400, Motor Upkeep Rs. 5,400, Printing and Stationery Rs. 3,200, Drawings Rs. 26,400, Payment to trade creditors Rs. 4,48,000, Discount allowed by creditors Rs. 4,8 00, Traveling Expenses Rs. 4,000. No ready figures are available for total sales but COJJI maintains a steady gross profit rate of 25% on sales. There were bills outstanding for petrol Rs. 100, Advertising Rs. 300 and Printing Rs. 180. Provide 5% on Debtors for doubtful debts and 2.5% on Creditors for discounts. The Motor Car and Furniture are to be depreciated by 20% and 5% respectively. 5% interest is to be allowed on Capital. Required: Prepare Trading and Profit and Loss Account for the Year ended 31st March, 20X2 and his Balance Sheet as on that date. Que. 7- Mr.X does not keep complete records of his bu siness but gives you the following information: His assets on 31st March, 20X2 consisted of Machineries Rs. 1,50,000. Furniture Rs. 60,000; Motor Car Rs. 40,000; Stock-in-trade Rs. 50,000; Debtors Rs. 80,000; Cash in hand Rs. 12,000 and Cash at Bank for Rs. 30,000; Creditors on that date amounted to Rs. 1,20,000. On further information received, you come to know that: On 1st  October, 20X1 he purchased a new machinery costing Rs. 50,000. Sales are made for cash as well as on credit. There is no cash purchases. He always sells his goods at cost plus 25%. Cash sales for the year were accounted for Rs. 80,000. During the year collection from Debtors amounted to Rs. 5,00,000 and a sum of Rs. 4,25,000 was paid to creditors. He obtained a Bank Loan for Rs. 50,000 on 1st April, 20X1, the entire amount was repaid in February, 20X2 with interest Rs. 2,500. In November, 20X1 his Life insurance Policy for Rs. 50,000 became matured and the same was invested in the  business. His Drawings were Rs. 2,500 per month all throughout the year. On 1st April, 20X1 he had Rs. 1,500 as Cash in hand and balance at Bank for Rs. 40,000. Debtors and Creditors on that date amounted to Rs. 60,000 and Rs. 90 ,000 respectively. Provide depreciation of Machineries @ 15% p.a. Furniture @ 10% p.a. and on Motor Car @ 20 % p.a. Required: Prepare a Statement of Profit and Loss for the year ended 31 st March, 20X2. Que. 8- X is tobacco merchant. He follows the practice of paying creditors for goods purchased through his Bank Account and making payments in cash on all nominal accounts: Particulars

st

1  April, 20X1 Rs.

st

31  Mar., 20X2 Rs.

Cash in Hand 30 Cash at Bank 1,000 Sundry Debtors 1,750 Sundry Creditors 3,410 Investments 6,250 Stock 2,500 Transactions during the year were as follows: Salaries Paid 1,500; General Expenses Paid 3,500; Payment for Stationary 870; Payment for Rent and Rates 700; Lighting Charges Paid 250; Cash receipts from Debtors 31,250; Payments to Creditors through Bank and of Trade Expenses in Cash 20,000; Payments into Bank –  Business 18,750; Payment into Bank –  Additional Capital 250; Payment from Bank Account –  Personal 3,250; Cash Payments –  Personal 910; Stock taken for personal use 140. Required: Prepare Trading and Profit and Loss Account for the year ended 31st March, Que. 9- The following facts have been ascertained from the records of X who maintains his books of accounts under the single entry system:

50 1,500 2,500 3,750 6,250 1,870

Receipts for the year ended 31 st March, 20X2: From sundry debtors Rs. 88,125; Cash Sales Rs. 20,625; Paid in by the proprietor Rs. 12,500. st Payments made during the year ended 31  March, 20X2: New Plant purchased Rs. 3,125; Drawings Rs. 7,500; Wages Rs. 33,625; Salaries Rs. 5,625; Interest paid Rs. 375; Telephone Rs. 625; Rent Rs. 6,000; Light and power Rs. 2,375; Sundry expenses Rs. 10,625; Sundry Creditors Rs. 38,125. It may be noted that he banks all receipts and makes all payments only by means of cheques. Assets and Liabilities: As at 31st March, 20X1 As at 31 st March, 20X2 Rs. Rs. Sundry Creditors 12,625 12,000 Sundry Debtors 18,750 30,625 Bank 3,125 ? Stock 31,250 15,625 Plant 37,500 36,575 Required: Prepare the Trading and Profit and Loss Account for the year ended 31 st March. 20X2 and Balance Sheet as on that date Que. 10- You are given the following information for the year 20X1-20X2 from the books of M/s X a firm engaged in Trading Operations: Average monthly sales for the year amounted to Rs. 60,000 Goods are sold at cost plus 33.33% Closing stock in trade on 31-3-20X2 Rs. 58,000 Stock Turnover Ratio –  10 Times Operating Ratio –  85% on turnover Depreciation charged on fixed assets for the year –  Rs. 20,000  Non-operating income for the year consisted of Bank interest Rs. 3,000 and Dividends received from Investment Rs. 5,000  None –  operating expenses amounted to Rs. 5,000 towards loss on sale of Fixed Assets. Required:  Prepare the Trading and P/L A/c of the firm for the year ended 31 st  March, 20X2 in detail showing Gross Profit, Operating Profit and Net Profit. Que. 11- The following is the Balance Sheet of the retail business of Mr. Raja (India) as at 31 st March 20X1: Liabilities Capital Creditors for goods Outstanding expenses (rent)

Rs. 1,25000 30,000 1,000

1,56,000

Assets Furniture and fittings Stocks Sundry debtors Cash at bank Cash in hand

Rs. 25,000 75,000 20,000 35,000 1,000

1,56,000

You are furnished with the following information: (a) Mr. Raja (India) always sells his goods at a profit of 25% on sales. (b) Goods are sold for cash and credit. Credit customers pay by cheque only. (c) Payments for purchases are always made by cheque. (d) It is the practice of Mr. Raja (India) to send to the bank every week-end the takings of the week after paying every week salaries of Rs. 250 to the clerk, sundry expenses of Rs. 50 and personal expenses Rs. 100. (e) Analysis of the bank pass book for the period ending 31st March 20X2 disclosed the following: Rs. Payments to creditors 75,000 Payment of rent 4,000 Amount remitted to the bank 1,35,000 (including cheques for Rs. 10,000 received from custo mers to whom the goods were sold on credit.) (f) The following are the balances on 31 st March, 20X2. Rs.

Stocks 32,500 Creditors for goods 32,500 Sundry debtors 30,000 st On the evening of 31  March 20X2 the cashier absconded with the available cash in cash box. Required: Prepare a Statement showing the amount of cash defalcated by the cashier and also a p/l a/c for the period ended 31 st March 20X2 and a Balance Sheet as on that date. Que. 12- Mr. X does not maintain complete records of his business but gives you the following information: Particulars

Machinery Sundry Creditors Sundry Debtors Stock in trade Cash in hand Furniture Cash at Bank

31.03.20X1 Rs.

31.03.20X2 Rs.

2,00,000 86,000 ? 70,000 2,600 27,000 15,600

1,50,000 ? 93,000 70,000 1,500 30,000 18,700

His Cash transactions for the year ending on 31 st March, 20X2, included the following besides certain other items: Payments to Creditors Rs. 4,10,000, Cash Sales (25% of total Sales) Rs. 1,70,000, Business Expenses Rs. 82,000, Cash Purchases Rs. 1,30,000, Collection from Debtors Rs. 5,27,000, Withdrawn for Household expenses Rs. 30,000. He maintains a uniform of gross profit of 25% on turnover. Outstanding expenses on 31 st March, 2000 amounted to Rs. 5,000. Addition of new machinery was made on October 1 st, 20X1. Some old furniture (Book Value Rs,. 6,000) was sold during the year and the proceeds stands credited to Furniture Account. Provide depreciation on Machinery @ 15% p.a. and on Furniture @ 10% p.a. (excluding sold item). Required: Prepare a Trading and P/L Account for the year ended 31st March, 20X2 and a Balance Sheet as on that date. Que. 13- From the following information of M/s X & Co. prepare Trading and Profit and Loss Account for the year ending on 31st March, 20X2 and the Balance Sheet as on that date. Particulars

31.3.20X1 Rs. 90,000 10,000 70,000 62,000 ? 60,000

31.3.20X2 Rs. 90,000 10,000 90,000 46,000 16,000 ?

Car Furniture Stock Debtors Bank Creditors The following further information is also available: (a) M/s X & Co. purchases goods for resale from manufacturers who allow discount of 3% on goods purchased in excess of Rs. 5,00,000 in a year. The discount for the year ended 31st March, 20X2 was Rs. 12,480. (b) All goods are sold at a gross profit margin of 30% o n selling price. (c) Bank statement for the year reveals the following payments: Creditors Rs. 9,03,520, Salaries Rs. 60,000, Car expenses Rs. 23,000, Rent Rs 30,000, Printing and Stationery Rs 6,400, Rates and Taxes Rs. 3,000, Carriage outward Rs. 18,600, Traveling expenses Rs. 14,900, Delivery Van purchased Rs. 1,70,000, Miscellaneous expenses Rs. 9,580, Drawings Rs. 50,000. (d) Depreciation on Car and Van @ 20 % and Furniture @ 10% is to b e provided on Balance as on 31.3.20X2. Que. 14- From the following information in respect of BHARAT a trader, prepare a Trading, Profit and Loss Account for the year ended 31st March, 20X2 and a Balance Sheet as on that date. (a) Liabilities and Assets: Particulars

Stock in trade

31.3.20X1 Rs. 80,000

31.3.20X2 Rs. 70,000

Debtors for Sales Bills Receivable Creditors for purchases Fixed Assets (at written down value) Expenses outstanding Prepaid expenses Cash in hand Bank Balance

1,60,00 1,10,000 60,000 20,000 6,000 2,000 10,000

1,49,500 17,500 1,50,000 63,500 18,000 7,000 1,500 4,750

(b) Receipt and Payment during the year Rs. Collections from Debtors (after allowing 2.5% discount) ? Payments to Creditors (after receiving 2% discount) 3,92,000 Proceeds of Bills receivable, discounted at 2% 61,250 Proprietor’s drawings  70,000 Purchases of Furniture midway through the year 10,000 4% Government Securities purchased (at 96% on 1.10.20X1) 96,000 Expenses 1,75,000 Miscellaneous income 5,000 (c) Sales are effected so as to realize a gross profit of 33-1/3% on the sale pr oceeds. (d) Goods costing Rs. 9,000, were issued as advertisement articles. (e) During the year, Bills Receivable were drawn on debtors. Of these, Bills amounting to Rs. 20,000 were endorsed in favour of creditors. Of this later amount, a bill for Rs. 4,000 was disho nored by the debtor. (f) Capital introduced during the year by the proprietor by cheques was omitted to be recorded in Cash Book, though the Bank  balance of Rs. 4,750 on 31st March, 20X2 (as shown above), takes the same into account. Que. 15- A and B are equal partners. Their books and records showed the following balance as on 31 st March, 20X1:

Rs. Factory Shed Account Due from Customers Advance for machinery (Machinery installed in Oct. 20X1) Dues to suppliers (including Rs. 5,000 for purchase of furniture in March, 20X1)

60,000 1,35,000 20,000

Rs. Bank Overdraft Stock at Cost Bills Payable Machinery Account Furniture Account

15,000 1,20,000 16,000 90,000 25,000

93,000

A fire occurred towards the end of March. 20X2 and a portion of the factory shed (book value Rs. 20,000) was destroyed. The following further information is furnished: Cost of machinery delivered and installed in July, 20X1 is Rs. 60,000. The balance amount due was paid in October 20X1. Sales for the year 20X1-20X2 were Rs. 1,00,000 per month of which 15% was cash sales. The firm maintains a steady gross profit rate of 25% on turnover. Cash purchases amounted to Rs. 25,000. Rs. Rs. Trade Debtors as on 31.03.20X2 Payment to Creditors (including liability for furniture) Discount allowed to Debtors Discount received from Creditors

50,000 7,70,000 5,000 6,000

Bills Payable as on 31.03.20X2 Bills Payable discharged A Partner’s Drawings B Partner’s Drawings Trade Creditors as on 31.03.20X2

21,000 45,000 25,000 25,000 1,22,000

Cash and Bank Balance as on 31 st March, 20X2 amounted to Rs. 2,10,000 and there was no bank o verdraft on that date. The figure of Cash and Bank on 1st April, 20X1 is not readily available. Net Profit for the year may b e assumed at Rs. 90,000 after providing for depreciation on Machinery Rs. 15,000 and on Furniture Rs. 25,000. Required: Prepare Trading and Profit and Loss Account for the year ended 31 st March, 20X2 and the Balance Sheet as on that date. Que. 16- the following is the Balance Sheet of Sri CAMHG as on 31 st March, 20X1:

Liability

Rs.

Capital Account Loan Creditors

96,000 30,000 62,000

Assets

Rs.

Building Furniture Motor Car Stock Debtors Cash in hand Cash at bank

65,000 10,000 18,000 40,000 34,000 4,000 17,000

1,88,000

1,88,000

A riot occurred on the night of 31st March, 2002 in which all boo ks and records were lost. The cashier had absconded with the available cash. He gives you the following information. (a) His sales for the year ended 31 st March, 20X2 were 20% higher than the previous year’s. He always sells his goods at cost plus 25%; 20% of the total sales for the year ended 31 st March, 20X2 were for cash. There were no cash purchases. (b) On 1st April, 20X1, the stock level was raised to Rs. 60,000 and stock was maintained at this new level all thro ughout the year. (c) Collection from debtors amounted to Rs. 2,80,000 of which Rs. 70,000 was received in cash. Business expenses amounted to Rs. 40,000 of which Rs. 10,000 was outstanding on 31st March, 20X2 and Rs. 12,000 was paid by cheques. (d) Analysis of the pass book revealed the payment to creditors Rs. 2,75,000, Personal Drawings Rs. 15,000, Cash deposited in Bank Rs. 1,43,000, Cash withdrawn from Bank Rs. 24,000. (e) Gross profit as per last year’s audited accounts was Rs. 60,000. Provide depre ciation on Building and Furniture at 5% and Motor Car at 20%. The amount defalcated by the cashier may be treated as recoverable from him. Required: Prepare the Trading and P/L Account for the year ended 31st March, 20X2 and the Balance Sheet as on that d ate. Que. 17- From the following particulars, prepare Trading and Profit & Loss Account for the year ending on 31 st March 20X2 and the balance Sheet as on that date: st Balance Sheet as at 31  March, 20X1 Liabilities Capital Creditors for goods Expenses outstanding

Rs. 1,72,000 62,500 5,000

Assets Machinery Furniture Stock Debtors Cash Bank

Rs. 70,000 15,000 35,000 1,00,000 5,000 15,000

2,40,000 Total Information: Debtors’ Velocity 2 months, Creditors’ Velocity 1.5 month, Stock level uniform, Gross Profit Ratio 33-1/3%, Sales are 20% in cash and 80% on Credit. Sales for the current year is 20% more than the previous year. Receipt from debtors cash Rs. 50,000, balance cheques, Depreciation rate 10%, Machinery Rs. 40,000, Payment out of Bank: Furniture Rs. 5,000, Investments Rs. 40,000, Drawings Rs. 17,500, Business Expenditure Rs. 60,000, Cash Payments: Business Expenditure Rs. 90,000, Cash deposited into Bank 1,00,000. Total

2,40,000

Que. 18- The following is the Balance Sheet of A and B as on 1 st April 20X1: Liabilities Capitals: A B Creditors for goods Creditors for expenses

Rs.

1,00,000 50,000 20,000 30,000 2,00,000

Assets Building Machinery Stock Debtors Bank

Rs. 65,000 50,000 30,000 40,000 15,000

2,00,000

Information: Creditors’ velocity 1 month, Debtors’ Velocity 1-1/2 months, Stock level uniform in value, Trade Expenses Rs. 75,000, Depreciation on machinery 10%, Depreciation on building 5%, In the current year, cost price will go up by 10%. Sales in the current year will increase by 20% in volume. Rate of gross profit –  no change, Drawings –  B Rs. 5,000, Required: Prepare Projected Trading, Profit and loss Account and Balances Sheet.

Que. 19- The following is the Balance Sheet of X a small trader as on 31.3.20X1. Liabilities Capital Creditors

Rs. ‘000 

200 50

Assets Fixed Assets Stock Debtors Cash in Hand Cash at Bank

Rs. ‘000

145 40 50 5 10 250 250 A fire destroyed the accounting records as well as the closing cash of the trader on 31.3.20X2. However, the following information was available. (a) Debtors and creditors on 31.3.20X2 sho wed an increase of 20% as compared to 31.3.20X1. (b) Credit Period: Debtors – 1 month : Creditors –  2 months (c) Stock was maintained at the same level throughout the year. (d) Cash sales constituted 20% of total sales. (e) All purchases were for credit only. (f) Current ratio as on 31.3.20X2 was exactly 2. (g) Total expenses excluding depreciation for the year amounted to Rs. 2,50,000. (h) Depreciation was provided at 10% on the closing value of fixed assets. (i) Bank and Cash transactions: (1) Payments to creditors included Rs. 50,000 by cash. (2) Receipts from debtors included Rs. 5,90,000 by way o f cheques. (3) Cash deposited into the bank Rs. 1 ,20,000. (4) Personal drawings from bank Rs. 50,000. (5) Fixed assets purchased and paid by cheques Rs. 2,25,000. You are required to prepare: (a) The Trading and Profit and Loss Account for the year ended 31.3.20X2 and (b) A Balance Sheet on that date. For your exercise, assume cash destroyed by fire is written off in the Profit and Loss Account. Que. 20- A and B started a business on April 1,20X1 with Rs. 50,000 as capital, contributed equally but the profit sharing ratio was 3:2. Their drawings were Rs. 300 and 200 per month respectively. They had kept no accounts but given you the following information: Particulars

31.3.20X2 Rs. 20,000 30,000 50,000 2,000 30,000 4,000 6,000

31.3.20X3 Rs. 25,000 30,000 60,000 500 20,000 3,000 8,000

Machinery at cost Stock in trade Debtors Cash Creditors Outstanding Expenses Bank Balance (as per Pass Book) Provision is to be made for depreciation at 10 per cent on the cost of machinery as at the end of each year. Debtors on 31.03.20X2 include Rs. 5,000 for goods sent out on consignment at 25 per cent above cost, and the goods were sold only in 20X3. A cheque for Rs. 1,000 had been deposited on 31.03.20X2 but was credited on 2.4.20X2. A cheque for Rs. 2,000 issued on 26.03.20X3 was presented on 3.4.20X3. A cheque for Rs. 1,000 was directly deposited by a customer on 27.03.20X3 but no entry is made either in Pass book or in Cash Book. A cheque for Rs. 500 deposited in march, 20X3 was dishonored but no adjustment for this was made. Required: Determine the profit for 20X2 –  20X2 and draw up a Balance Sheet as at 31 st March, 20X3. Que. 21- S.K. Mittal does not maintain proper books o f accounts. He provides you with the following details:

(a) Sales and Purchases Policy: Total Sales during 2000  –   Rs. 6,00,000. Volume of sales during 2 nd half of 2000 was one third that of 1st half. Volume of credit sales was twice of Cash Sales evenly throughout the year. All purchases were on credit and made evenly throughout the year. (b) Credit Policy: Closing Debtors represent last two months’ sales whereas Closing Creditors represent last 3 months’ purchases (c) Price Policy: Goods were sold at 1 0% profit on credit sales. Cash selling price was always at a profit of 5% of Sales. (d) Inventory Policy: First 2 months’ requirements were held as Opening Stock whereas last months’ requirements was held as Closing Stock. Required:  ascertain the (i) Opening Stock as on 1.1.20X1, (ii) Closing Stock as on 31.12.20X1, (iii) Total Purchases during 20X1, (iv) Closing Debtors and Creditors as on 31.12.20X1 Que. 22- Shri Rashid furnishes you with the following information relating to his business: (a) Assets and liabilities as on 1.1.20X1 31.12.20X1 Rs. Rs. Furniture (w.d.v.) 6,000 6,350 Stock at cost 8,000 7,000 Sundry debtors 16,000 ? Sundry creditors 11,000 15,000 Prepaid expenses 600 700 Unpaid expenses 2,000 1,800 Cash in hand and at bank 1,200 625 (b) Receipts and Payments during 20X1: Collection from debtors, after allowing discount of Rs. 1,500 amounted to Rs. 58,500. Collections on discounting of bills of exchange, after deduction of discount of Rs. 125 b y the bank, totaled to Rs. 6,12. Creditors of Rs. 40,000 were paid Rs. 39,200 in full settlement of their dues. Payment for freight inwards Rs. 3,000 Amounts withdrawn for personal use Rs. 7,000 Payments for office furniture Rs. 1,000 Investment carrying annual interest of 4% were purchased at Rs. 96 on 1st July, 20X1 and payment made therefore. Expenses including salaries paid Rs. 14,500. Miscellaneous receipts Rs. 500. (c) Bills of exchange drawn on and accepted by customers during the year amounted to Rs. 10,000. Of these, bills of exchange of Rs. 2,000 were endorsed in favour of creditors. An endorsed bill of exchange of Rs. 400 was dishonoured. (d) Goods costing Rs. 900 were used as advertising materials. (e) Goods are invariably sold to show a gross profit of 33.1/3% o n sales. (F) Difference in cash book, if any, is to be treated as further drawing or introduction by Shr i Rashid. (g) Provide at 2.5% for do ubtful debts on closing debtors. Required: Prepare Trading and Profit and Loss Account for the Year ended 31 st December, 20X1 and the Balance Sheet as on that date. Que. 23- A and B who had conducted separate business of merchants as sole traders agreed on 28 th February, 20X2 to enter into  partnership as from 1 st April, 20X2. B had not kept proper records and in order to establish the interests of the partners on 1 st April, 20X2, it was arranged that B should carry on business for the month of March, 20X2 and upon the results of that month, their respective interests in the partnership would be determined. The following is a summary of B’s transactions for the month of March, 20 X2. Rs. th Cash at Bank on 28 February, 20X2 as per Bank statement 5,200 Unpresented cheque at the date. 6,150 Furniture as per valuation 22,000 th Sundry debtors –  28 February, 20X2 19,000 Sundry creditors –  28th February, 20X2 18,900 st Cash at bank on 31 March, 20X2 as per Bank statement 11,840 st Unpresented cheques –  31 March, 20X2 2,080 Credit sales during the month, the cost of which was Rs. 4,520, amounted To Rs. 7,100. Included in these sales was a sale at Rs., 3,200, the cost of

which Was Rs. 1,800 and these goods were no t delivered until 3rd April, 20X2. Credit purchases including goods received on 2 nd April, 20X2 and costing Rs. 2,500 11,240 st Stock in hand, taken on 31 March, 20X2 and priced at cost, amounted to 30,000 A credit note was issued on 9 th March, 20X2 for an overcharge in an Invoice dated 27th February, 20X2 800 Cash receipts were: Debtors 13,000 Cash sales (cost of goods sold Rs. 9,600) 13,450 Cash disbursement were: Commission 1,800 Salaries and expenses 1,600 Rent 400 Creditors (after deduction Rs. 100 discount) 9,900 Drawings 2,000 Bank charges and interest 40 Required: Prepare B’s statement of Assets and Liabilities and Capital as at 31 st March, 20X2 and Revenue statement for the month then. Depreciation may be disregarded. Que. 24- Mr. X, a sole trader, does not keep proper accounting records for his business transactions. The following information regarding his assets and liabilities on 31 st March, 20X1 is available: Assets Stock Debtors Cash Bank balance Premises Motor vehicles

Rs. 75,000 69,800 4,800 66,000 3,00,000 61,000

Liabilities Creditors Term loan Furniture and fittings Outstanding expenses

Rs. 85,000 80,000 1,10,000 2,700

The cash book entries reveal the following: Opening balance Collection from deposited

Cash Rs. 4,800

Bank Rs. 66,000

customers 7,06,000

Cash Rs.

Payment to suppliers Salaries & Wages Motor expenses Cash purchases (paid by cheques, General expenses Drawings

9,200 960

1,720

Bank Rs. 4,42,800 26,400 14,800

1,49,600 18,680 85,120

Further information is given below: (a) The total receipts from customers have not been fully recorded. The figure of Rs. 7,06,000 has been taken from the bank statement. (b) The opening bank balance includes private investment income of Rs. 2,880. (c) Goods costing Rs. 38,400 have been sold by adding 10% profit. In respect of other goods, the mark up has been 25%. (d) A discount of Rs. 10,800 has been received from suppliers for early settlement of bills. (e) Interest on long-term loan is payable at 12% per annum. Half year’s interest remained outstanding on 31 st March, 20X2. (f) Rs. 2,000 was owing for salaries and wages and Rs. 1,560 was owing for general expenses at 31st March, 20X2. (g) Depreciation is to be provided on motor vehicles for the year at 10% of the book value and on furniture and fittings at 5% of the book value. (h) Other balance on 31 st March, 20X2. were: Debtors Rs. 73,280, Creditors Rs. 82,280, Stock Rs. 71,400. You are required to prepare: (a) a Trading and Profit and Loss Account for the year ended 31 st March, 20X2; and (b) a Balance Sheet as at 31 st March, 20X2.

Que. 25- Radha keeps her books in single entry system. From the following, prepare the Trading and Profit and Loss Account for the year ended 31st March, 20X2 together with the balance sheet on that date. Rs. Rs. Interest charges 1,000 Received from debtors 2,50,000 Personal withdrawals 20,000 Cash sales 1,50,000 Staff salaries 85,000 Other business expenses 79,000 Payments to creditors 1,50,000 Balance in bank on 31.3.20X2 24,250 Cash in hand on 31.3.20X2 750 Further details available are: On 1.4.20X1 On 31.3.20X2 Stock 90,000 1,02,200 Creditors 80,000 55,000 Debtors 2,20,000 3,00,000 Furniture 10,000 10,000 Premises 1,50,000 1,50,000 Provide 5% interest on Radha’s capital balance as on 1.4.20X1. Provide Rs. 15,000 for doubtful debts, 5% d epreciation on all fixed assets. 5% group incentive commission to staff has to be provided for on net profit after meeting all expenses and the commission. Que. 26- Mr. X is a small trader, and is financially incapable of ingaging the services of an accountant. He keeps no books but only an account with a Bank in which all takings are lodged after meeting business expenses and his personal drawings and through which all payments for business purchases are passed. You are required to ascertain his trading result for the year ended 31 st March, 20X3 and the financial position of his  business as on that date from the following information supplied by him: (a) The Bank statement shows deposits during the year of Rs. 12 ,020 and withdrawals of Rs. 11,850. (b) Rs. 1,000 had b een placed in fixed deposit account on 31 st December, 20X1 at 10% per annum and withdrawn with interest on 30th June, 20X2. (c) The assets and liabilities on 31 st March, 20X3 were: Stock Rs. 1,100; Book Debts Rs. 11,150; Bank Balance Rs. 320; Furnit ure Rs. 2,000 and Trade creditors Rs. 400. (d) In the absence of reliable information, estimates are supplied on the following matters. (i) The Stock and Book Debts have each increased by Rs. 100 during the year. (ii) The Trade creditors were Rs. 200 on 1st April, 20X2. (iii) During the year personal expenses amounted to Rs. 800 and business expenses Rs. 700. Ignore fractions. Que. 27- K.Azad, who is in business as a wholesaler in sun flower oil, is a client of your accounting firm. You are required to draw up his final accounts for the year ended 31.3.20X2. From the files, you pick up his Balance Sheet as at 31.3.20X1 reading as  below: Balance Sheet as at 31.3.20X1 Liabilities K.Azad’s Capital Creditors for Oil Purchases 12% Security Deposit from Customers Creditors for Expenses: Rent Salaries Commission

Rs. 1,50,000 2,00,000 50,000

6,000 4,000 20,000

Assets Cash and Bank Balance Debtors Stock of Oil (125 tins) Furniture Less: Depreciation

30,000 3,000  _________

Rent Advance Electricity Deposit 3-Wheeler Tempo Van Less: Depreciation

4,30,000

Rs. 75,000 1,60,000 1,25,000

40,000 10,000  _________

27,000 12,000 1,000

30,000 4,30,000

A Summary of the rough Cash Book K.Azad for the year ended 31.3.20X2 is as below: Cash and Bank Summary Rs. Receipts Cash Sales Collections from Debtors Payments To Landlord Salaries Miscellaneous Office Expenses Commission Personal Income –  Tax Transfer on 1.10.20X1 to 12% Fixed Deposit To Creditors for Oil Supplies

5,26,500 26,73,500 79,000 48,000 12,000 20,000 50,000 6,00,000 24,00,000

A scrutiny of the other records gives you the following information: (i) During the year oil was purchased at 250 tins per month basis at a unit cost of Rs. 1,000. 5 tins were damaged in transit in respect of which insurance claim has been preferred. The surveyors have since approved the claim at 80%. The d amaged ones were sold for Rs. 1,500 which is included in the cash sales. One tin has been used up for personal consumption. Total number of tins sold during the year was 3,000 at a unit price of Rs. 1,750. (ii) Rent until 30.9.20X1 was Rs. 6,000 per month and was increased thereafter by Rs. 1,000 per month. Additional advance rent of Rs. 2,000 was paid and this is included in the figure of payments to landlord. (iii) Provide depreciation at 10% and 25% of WDV on furniture and tempo van respectively. (iv) It is further noticed that a customer has paid Rs. 10,000 on 31.03.20X2 as security deposit by cash. One of the staff has defaulted. The claim against the Insurance Company is pending. Required: Prepare final account for the year ended 31.3.20X2. Que. 28- The following is the Balance Sheet of the retail business of Sri X as at 31 st December, 20X1. Liabilities Sri Srinivas’s Capital Liabilities for goods Rent

Rs. 1,00,000 20,500 1,000

Assets Furniture Stock Debtors Cash at bank Cash in hand

Rs. 10,000 70,000 25,000 14,500 2,000

1,21,500 1,21,000 Total Total You are furnished with the following information: (i) Sri X sells his goods at a profit of 20% on sales. (ii) Goods are sold for cash and credit. Credit customers pay by cheques only. (iii) Payments for purchases are always made by cheques. (iv) It is the p ractice of Sri X to send to the b ank every weekend the collections of the week after paying every week, salary of Rs. 300 to the clerk, Sundry expenses o f Rs. 50 and personal expenses Rs. 100. Analysis of the Bank Pass-Book for the 13 week period ending on 31st March, 20X2 disclosed the following: Rs. Payments to creditors 75,000 Payments of rent upto 31.3.20X2 4,000 Amounts deposited into the bank 1,25,000 (include Rs. 30,000 received from debtors by cheques) The following are the balance on 31 st March, 20X2: Stock 40,000 Debtors 30,000 Creditors for goods 36,500 On the evening of 31st March, 20X2 the Cashier absconded with the available cash in the cash bo x. There was no cash deposit in the week ended on that date.

Required:  Prepare a Account showing the amount of cash defalcated by the Cashier and also a Trading & Profit and Loss Account for the period ended 31st March, 20X2 and a Balance Sheet as on that date. Que. 29- Mr. Pranlal is a dealer in fertilizers. He purchases some chemicals and mixes them to manufacture the fertilizers. He has  prepared the following statements He requires you to examine them, and prepare Trading Account, Profit & Loss Account and Balance Sheet, after taking into account the additional information furnished: Dr. Cr. (a) Trading and Profit & Loss Account as on 31.3.20X2   Particulars

Rs.

Particulars

Rs.

To Stock as on 31.3.20X2 To Purchases To Expenses

8,00,000 8,00,000 7,00,000

By Sales By Creditors By Stock as on 1 .4.20X1 By Other income By Net loss

5,00,000 10,00,000 2,00,000 1,00,000 5,00,000

23,00,000 Particulars To Capital as on 1.4.20X1 3,00,000 Less: Loss 5,00,000 ----------To Loans taken on 1.4.20X1 at 12% To Surpluses (Differences)

23,00,000

Balance Sheet for the year ended 31.3.20X2 Rs. Particulars

By Debtors By Cash By Bank By Closing stock

8,00,000

1,00,000 4,50,000 13,50,000

Rs. 2,50,000 20,000 80,000 10,00,000

13,50,000

He is entitled to a rebate of 10 per cent on the listed price of a chemical. The purchases during the year ended 31 st March, 20X2 of the said chemicals at the listed price, included in the purchases, amounted to Rs. 4,00,000 (b) The details of the expenses are as under : Mixing wages Rs. 2,00,000 Administration and selling expenses Rs. 2,00,000, Mixing equipments purchased Rs. 1,00,000, Construction of factory sheds Rs. 1,00,000, Advance for materials Rs. 1,00,000. (c) A certain raw material was received on 2 nd  April, 20X2, the invoice for which amounting to Rs. 1,00,000 is included in the purchases. (d) A customer who purchased the goods for Rs. 1,00,000 has not taken delivery. The value of such stock was inadvertently included in the closing stock as on 31 st March. 20X2. (e) He had entered into a joint venture with Mr. Babu Ram, The sales made on account of the joint venture was included in the sales for Rs. 2,00,000. He had paid Rs. 1,00,000. for the purchase of raw materials. It has been included in the expenses. His share of profit in the venture was determined at Rs. 50,000. The amount paid for setting the account was wrongly debited to Debtors Account. (f) Sums received for cash sales of Rs. 5,00,000 was included in the Creditors. (g) An invoice for Rs. 50,000 for the goods received on 25th March, 20X2 and included in the stock was received only on 1st April, 20X2. (h) Other out standings as on 31st March, 20X2 were: (i) For the erection of factory sheds Rs. 50,000 (b) Adm. & Selling expenses Rs. 25,000 (j) Provide depreciation at 5 per cent on the factory sheds and fat 10 per cent on the equipments on the closing  balances. (k) The Bank Balance of Rs. 80,000 includes the encashment of his personal deposit of Rs. 50,000 with the bank. He had forgotten to credit his Capital Account with this amount. Que. 30- You have been p rovided with following information of M/s Sybal Enterprises as on 31 st December 20X1 st (a) Summarised Balance Sheet as at 31  December, 20X1 Liabilities Capital Loan Expenses Creditors

Rs. 2,37,474 1,00,000 12,050

Assets Fixed Assets: (Cost less Depreciation) Land

Rs.

25,000

Trade Creditors

2,47,903

5,97,247 st

Building (Rs. 1,42,000  –   Rs. 27,500) Fixture & Fittings (Rs. 21,405 –  Rs. 11,214) Motor Vehicles (Rs. 24,690  –   Rs. 18,690) Current Assets: Stock in trade Sundry Debtors Cash at Bank Cash in hand

1,14,500 10,191 6,000 2,37,423 1,95,115 7,048 2,150 5,97,247

(b) During the year ended 31  Dec. 20X2 the following trading transactions took place: Cash Sales Rs. 4,27,042, Receipt from Debtors Rs. 10,07,401, Payment to trade Creditors Rs. 9,28,213, Wages paid Rs. 2,04,111, Overhead Expenses paid Rs. 57,410, Interest on loan paid Rs. 5,000, Salaries Rs. 1,50,000 (c) Depreciation, on the reducing balance method, is to be provided @ 4% p.a. on buildings, 15% p.a. on fixtures & fittings and 25% p.a. on the motor vehicles. (d) On 1st June 20X2 the enterprise acquired a vehicle on hire purchase terms which provided for the payment of a deposit of Rs. 1,000 and 24 monthly installments of Rs 200 commencing on 30th June, 20X3. The cash price of the vehicle is Rs. 5,200 The only other movement in fixed assets was the scrapping of the old vehicle which originally cost of Rs. 1,960 and had accumulated depreciation of Rs. 1,699. (e) On 31st Dec. 20X2 –  Stock at cost Rs. 2,47,628, Debtors Rs. 1,89,400, Creditors Rs. 2,58,107 Cash in hand amounted to Rs. 1,945, Expenses Creditors –  Nil (f) On 30th June, 20X2 the loan was repaid at a discount of 14% (g) The proprietor has withdrawn during the year Rs. 1,000 Required: Prepare: (A) Joint Cash & Bank Account Trading and Profit & Loss Account for the year ended 20X2 and the Balance Sheet as on that date.