SingleEntryExamplePartI
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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 Amount withdrawn for personal use Rs.7000. 6.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.
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