SingleEntryExamplePartI

This e-Lecture was Recorded on: December 18, 2012

CCOUNTS FROM  A CCOUNTS INCOMPLETE RECORDS  – SINGLE ENTRY S YSTEM

MODULE IV(1)

OF IV

CA Intermediate (IPC) Course Paper 1 Accounting Chapter 10 CA. Prathap. S.S 1

© The Institute of Chartered Accountants of India

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This e-Lecture was Recorded on: December 18, 2012

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GENDA   A GENDA 

To learn to do full fledged 16 marks/20 marks sum which were asked in the previous exams.

IPCC(R ASHID SUM) (20 marks Intermediate May 1998)

Rashid Sum Shri Rashid furnishes you with the following information relating to his business (a) Assets and Liabilities as on : 1.1.97 31.12.97 Rs Rs Furniture (W.D.V) 6000 6350 Stock at cost 8000 7000 Sundry debtors 16000 ? Sundry creditors 11000 15000 Prepaid expenses 600 700 Unpaid expenses 2000 1800 Cash in hand and at Bank 1200 625

.....Rashid Sum (b) Receipts and payments during 1997. 1. Collection from trade debtors after allowing discount of Rs. 1500 amounted to Rs. 58500 . 2. Collection on discounting of bills of exchange after discounting of Rs.125 by the bank, totalled to Rs.6125. 3. Creditors of Rs.40000 were paid Rs. 39200 in full settlement of their dues. 4. Payment for freight inwards Rs. 3000.

.....Rashid Sum 5. Amount withdrawn for personal use Rs.7000. 6. Payment for office furniture Rs.1000. 7. Investment carrying annual interest of 4% was purchased at Rs.96 on 1.7.97 and payment made. 8. Expenses including salaries paid Rs.14500. 9. Miscellaneous receipts Rs.500.

.....Rashid Sum (c) Bills of exchange drawn on and accepted by customers during the year amounted to Rs.10000 of these, bills of exchange of Rs.2000 were endorsed in favour of creditors and endorsed bill of exchange of Rs. 400 was dishonored. (d) Goods costing Rs. 900 were used as advertising materials. (e) Goods are invariably sold to show a gross profit of 331/3% on sales.

.....Rashid Sum (f) Differences in cash book, if any, is to be, treated as further drawings or introduction by Shri Rashid. (g) provide 2.5% for doubtful debts on closing debtors Rashid asks you to prepare a trading and profit and loss A/c for the year 31.12.97 and the balance sheet as on that date.

 A PPROACH TO THE SUM In this sum all the figures for Opening Balance Sheet have been provided . The Balancing figure is the Opening Capital of Rashid , which comes to Rs.18,800 , which is ascertained as follows from the Opening Balance Sheet.

a ance Opening Capital

ee o as 01.01.1997

18,800 Sundry Debtors

(balancing figure) Outstanding exp.

16,000 6,000

Stock

8,000

2,000 Prepaid expenses 31,800

1

Furniture

Sundry Creditors 11,000 Cash Total

as on

600 1,200 31,800

12

REQUIREMENTS OF THE SUM The following A/c’s need to be opened : (i)Trading , Profit and Loss A/c y.e 31.12.1997 (ii)Cash and Bank A/c (iii)Sundry Debtors A/c & Bills Receivables A/c (iv)Sundry Creditors A/c (v)Furniture A/c

STEPS TO BE FOLLOWED

We will now deal with the details of Rashid’s cash and bank transactions one by one , giving journal entries and posting it in their respective T a/c’s.

JOURNAL ENTRIES

(1)Collection from trade debtors after allowing discount of Rs. 1500 amounted to Rs. 58500 . Cash A/c

Dr.

58,500

Discount A/c

Dr.

1,500

To Sundry Debtors A/c

60,000

Cash A/c To Opening Balance

1,200

To Sundry Debtors

58,500

By Closing balance

625

Debtors A/c To Opening Balance

16,000

By Cash

58,500

By Discount

1,500

(2)Collection on discounting of bills of exchange after discounting of Rs.125 by the bank, totalled to Rs.6125.

Cash A/c

Dr.

Discount A/c

Dr.

6,125 125

To Bills Receivables A/c

6,250

Cash A/c To Opening Balance

1200

To Sundry Debtors

58,500

To Bills of Exchange

6125

By Closing Balance

625

Bills Receivables A/c By Cash

6125

By Discount

125

(3)Creditors of Rs.40000 were paid Rs. 39200 in full settlement of their dues. Sundry Creditor A/c

Dr.

40,000

To Cash A/c

39,200

To Discount A/c

800

Cash A/c To Opening Balance

1200

To Sundry Debtors

58,500

By Sundry Creditors

39,200

To Bills of Exchange

6125

By Closing Balance

625

Creditor A/c To Cash To Discount To Balance b/d

39,200 800 15,000

By Opening Balance

11,000

(4)Payment for freight inwards Rs. 3000. Freight Inwards A/c

Dr. 3,000

To Cash A/c

3,000

Cash A/c To Opening Balance

1200

By Sundry Creditors 39,200

To Sundry Debtors

58,500

By Freight Inward

3,000

To Bills of Exchange

6125

By Closing Balance

625

Freight Inward will be debited to Trading A/c .

(5)Amount withdrawn for personal use Rs.7000. Drawings A/c

Dr.

7,000

To Cash A/c

7,000 Cash A/c

To Opening Balance

1200

By Freight inward

3,000

To Sundry Debtors

58,500

By Sundry Creditors

39,200

To Bills of Exchange

6125

By Drawings

7,000

By Closing Balance

625

Drawings will be reduced from the closing capital in the closing Balance Sheet

(6)Payment for office furniture Rs.1000. Furniture A/c

Dr.

1,000

To Cash A/c

1,000

Cash A/c To Opening Balance

1200

By Freight inward

3,000

To Sundry Debtors

58,500

By Sundry Creditors

39,200

To Bills of exchange

6125

By Drawings

7,000

By Furniture

1,000

By Closing balance

625

Furniture A/c To opening balance

6,000

To Cash

1,000

By closing balance

6350

(7)Investment carrying annual interest of 4% was purchased at Rs.96 on 1.7.97 and payment made

Assumptions : The face value of investment was Rs.100 but was purchased for Rs.96 on 1st July 1997 at 4 % interest. Interest receivable

= 100 * 4 % * (6/12) = Rs.2

All Interest Receivables should be credited to P&L a/c & added to the investment in the Balance Sheet.

....Contd 4% Investment A/c

Dr.

96

To Cash A/c

96

Interest Accrued A/c

Dr.

2

To Interest Receivables A/c

2

Cash A/c To Opening Balance

1200

By Freight inward

3,000

To Sundry Debtors

58,500

By Sundry Creditors

39,200

To Bills of exchange

6,125

By Drawings

7,000

To Misc. Receipts

500

By Furniture

1,000

By 4% Investment

96

By Closing balance

625

(8)Expenses including salaries paid Rs.14500. Calculation of Exp : Cash paid for expenses

14,500

(+) Prepaid expenses paid last year

600

(-) Prepaid expenses paid this year

(700)

(-) Last year outstanding expenses

(2,000)

(+) This year outstanding expenses

Amount to be debited to P&L

1,800

14,200

(9)Miscellaneous receipts Rs.500. Cash A/c

Dr.

500

To Miscellaneous Receipts A/c

500

Cash A/c To Opening Balance

1200

By Freight inward

3,000

To Sundry Debtors

58,500

By Sundry Creditors 39,200

To Bills of exchange

6,125

By Drawings

7,000

To Misc. Receipts

500

By Furniture

1,000

By 4 % Investment

96

By Closing balance

625

Miscellaneous Receipts will appear in the Credit side of P & L A/c

Bank and Cash A/c To Opening Balance To Sundry Debtors To Bills of exchange To Misc. Receipts

1,200 By Freight inward

3,000

58,500 By Sundry Creditors 39,200 6,125 By Drawings

7,000

500 By Furniture

1,000

By Expenses paid By Investment

66,325

14,500 96

By Drawings

904

By Closing balance

625 66,325

(C)Bills of exchange drawn on and accepted by customers during the year amounted to Rs.10000 , of these bills of exchange of Rs.2000 were endorsed in favour of creditors and endorsed bill of exchange of Rs. 400 was dishonored. Bills of exchange drawn on & accepted by customers during the year amounted to Rs.10,000. Bills Receivables A/c Dr. 10,000 To Sundry Debtors A/c 10,000 Of these Rs.2000 were endorsed in favour of Creditors. Sundry Creditor’s A/c Dr. 2,000 To Bills Receivables A/c 2,000 An endorsed Bill of exchange of Rs.400 was dishonoured. Sundry Debtor’s A/c Dr. 400 To Sundry Creditor’s A/c 400

Sundry Debtors A/c To Opening balance

16,000 By Cash By Discount

58,500 1,500

To Sundry Creditors 400 By Bills Receivables 10,000 To Credit Sales

73,050 By Bal c/d

?

Bills Receivables A/c To Sundry Debtors 10,000 By discount (Bills Receivables drawn & accepted)

By bank

125 6,125

By Sundry Creditors 2,000 By Closing balance

?

Sundry Creditors A/c To Cash To Discount

39,200 By o/p balance 800 By Credit

To Bills Receivables

Purchase

?

2,000 By Sundry Debtors

400

To closing balance

11,000

15,000

Sundry Creditors A/c To Cash To Discount

39,200 By o/p balance 800 By Credit

To Bills Receivables

11,000

Purchase 2,000 By Sundry Debtors

45,600 400

To closing balance

15,000 57,000

57,000

Bills Receivables A/c To Sundry Debtors 10,000

By discount

(Bills Receivables

By bank

drawn & accepted)

125 6,125

By Sundry Creditors

2,000

By Closing balance 10,000

1,750 10,000

 (d)Goods costing Rs.900 were used as advertising materials. Advertisement A/c To Purchases A/c

Dr.

900 900

Note : Advertisement will be debited to P&L A/c and reduced from Purchases in Trading A/c.

(f)Differences in cash books, if any, is to be, treated as further drawings or introduction by Shri Rashid.

The Balancing figure in Cash Book is Rs. 904 appearing on the credit side , so it represents drawings by Rashid.

Bank and Cash A/c To Opening Balance To Sundry Debtors To Bills of exchange To Misc. Receipts

1,200 By Freight inward

3,000

58,500 By Sundry Creditors 39,200 6,125 By Drawings

7,000

500 By Furniture

1,000

By Expenses paid By Investment

66,325

14,500 96

By Drawings

904

By Closing balance

625 66,325

Furniture A/c To Opening Balance To Cash

By Depreciation

650

6,000 1,000 By Closing Balance 7,000

6,350 7,000

(e)Goods are invariably sold to show a gross profit of 331/3% on sales. Calculation of Gross Profit : COGS = O/p stock + Purchases + Direct expenses - c/s stock = 8,000 + 44,700 + 3,000 - 7,000 = 48,700 G.P

= 1/3 on sales = 1/2 on cost = 1/2(48,700)

G.P

=

24,350

Trading A/c To Opening Stock

8,000 By Sales

73,050

To Purchases 45600 (-)Advertisement

900

To Freight Inward To Gross Profit

44,700 By Closing Stock

7,000

3,000 24,350 80,050

80,050

38

Sundry Debtors A/c To Opening

16,000 By Cash

balance

By Discount

58,500 1,500

To Sundry Creditors 400 By Bills Receivables 10,000 To Credit Sales

73,050 By Bal c/d 4,27,500

19,450 4,27,500

(g)Provide 2.5% for doubtful debts on Closing Debtors.

Provision for Bad Debts

= 19,450 * 2.5 % =

486.25

≈

Rs.486

( Provision for Bad Debts will be Debited to P&L a/c & Deducted from the Closing Debtors in the Closing Balance Sheet )

Provision for Bad Debts will not appear in Sundry Debtor’s a/c because they are calculated on Closing Balance of Sundry Debtor’s as they are only anticipated losses and not actual losses.

 Profit & Loss A/c To Expenses

14,200 By Gross

To Discount allowed

1,500

To Discounting of Bills

24,350

Profit b/d

125 By Discount Received

To Advertisement

800

900 By Interest Receivable

To Provision for Bad

By misc. Receipts

Debts

486

To Net profit c/d

7,791

2 500

42

25,652

25,652

B/s of Rashid as on 31.12.97 Capital

18,800

S. Debtor

19450

(-)Drawings(7,000) (+)Profit 7791

(-)Provision

486

(-)Drawings (904)

Furniture

7000

S. Creditor Unpaid Expenses

18,964

18,687 (-)depreciation 650 Stock

6,350 7,000

Prepaid Expenses

700

Cash

625

15,000 Bills Receivables 1,800 4% Investment

1,750 96

(+)Int.Receivable 2 35,487

98

43

35,487

Summary This is a very comprehensive sum with some beautiful adjustments . Students practising it can indeed master Single Entry.