S.Y.B.Com. Accountancy & Financial Management Prof. R.N.

Savkare

Accounting from Incomplete

Records
DOUBLE ENTRY STYSTEM
Meaning:
This System is based on the fact that there are two aspects of every transaction.
Each transaction involves at least two persons, parties or accounts. A transaction affects
at least two accounts. it means for every debit there is credit and for every credit there is
debt. And therefore while recording a particular transaction both the aspects of
transactions are recorded.

Under this system since both the aspect of the transactions are recorded we can
prepare complete trial balance and final accounts as well.

It is followed by the organizations having large scale operations for eg. Joint
Stock Companies.

INCOMPLETE RECORDS
Meaning:

Every businessman required following accounting information for smooth

operations:
a. Availability of cash at nay point of time
b. The amount of money business has to pay to the outsiders and
c. The amount of money business has to recover from the outsiders.

The availability of cash surplus and details of cash transactions can be known only if the
daily cash transactions are recorded in a cash book. Thus, if goods are purchased in cash,
an entry will be passed in the cash book for payment made but corresponding debit to
purchase account shall not be made since purchase register is not kept. If the proprietor
brings cash into business then the receipt of money will be recorded in the cash book, but
corresponding credit in the capital account of proprietor will not be passed since no
ledger is maintained for proprietor. Such kind of system where only limited set of
accounts are maintained is called as ‘Single Entry System’.

It is a system wherein only few records are maintained in the books of accounts. Under
this system only cash and personal accounts are kept; impersonal and other real accounts
are not maintained.

It is suitable only for small organizations like sole trading concern, partnership forms etc.

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S.Y.B.Com. Accountancy & Financial Management Prof. R.N.Savkare

Practical Problems

1. Vikas is a 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 1.1.2010 31.12.2010

Cash n hand 30 50
Cash at Bank 1,000 1,500
Sundry Debtors 1,750 2,500
Sundry Creditors 3,410 3,750
Investments 6,250 6,250
Stock 2,500 1,870

Transactions during the year 2010 were as follows:

Particulars Rs.
Salaries paid 1,500
General Expenses paid 3,500
Payment for Stationery 870
Payment for Rent and Rates 700
Lighting Charges 250
Cash receipts from Debtors 31,250
Payments to Creditors through Bank and Trade expenses in Cash
Payments into Bank 20,000
Business
Additional Capital 18,750
Payments from bank Account – Personal 250
Cash Payments – Personal 3,250
Stock taken for personal use 910
140

You are required to prepare Trading and Profit & Loss Account for the year ended 31 st
December 2010 and Balance Sheet of Mr. X as on that date.

2. Mr. B maintained his accounts on Single Entry System. His balances for the year
ended 31st March 2007 and 31st March 2008 were as follows:

Particulars 31.3.2007 31.3.2008

Bills Receivable 4,000 2,400
Stock 7,900 8,800
Creditors 9,400 8,350

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S.Y.B.Com. Accountancy & Financial Management Prof. R.N.Savkare

Cash 3,908 1,963

Bills Payable 3,471 5,051
Debtors 9,361 8,355
Furniture 2,000 2,000

From his cash book for the year 2007-08 , following information is available:
Wages Rs. 900; Bills Payable Rs. 3,000’ Bills Receivable Rs. 4,300; Misc. Expenses Rs.
700, Salary Rs. 800; Investment purchased Rs. 1,000; Sales Rs. 1,200; Purchases Rs. 600;
Received from debtors Rs. 2,450; [aid to Creditors Rs. 1,425; Misc. Income Rs. 30 and
Drawings Rs. 1,500.
Additional information: discount allowed and received were Rs. 400 and Rs. 355
respectively. During the period, Mr. B accepted Bills for Rs. 4,580 and received Bills for
Rs. 3,000. His Bad Debts were Rs. 560 and Bills Receivable dishonoured Rs. 300.

Give Trading Account, and Profit & Loss Account for the year ended 31 st March 2008
and the Balance Sheet as on that date.

3. Mr. A. keeps his books by single entry. An analysis of his cash book for the year ended
31st December 2007 gives the following particulars:

Particulars Rs.
Debit Side
Received from Sundry Debtors 6,000
Paid on Capital Account 1,500
Credit Side
Due to Bank 1.1.2007 500
Payments to Sundry Creditors 2,500
General Expenses of Business 1,000
Wages 1,550
Drawings 300
Balance with Bank 1,400
Balance in Hand 250

Further additional information is as under:

Particulars 1.1.2007 31.12.2007

Debtors 5,300 8,000
Creditors 1,500 1,950
Stock 1,700 1,900
Plant and Machinery 2,000 2,000
Furniture and Fittings 1,000 1,000

The following information is as under:

i. Interest on capital should be provided at 10% per annum (drawings and payments
for capital should be ignored).

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S.Y.B.Com. Accountancy & Financial Management Prof. R.N.Savkare

ii. Depreciation at the rate of 10% per annum on Plant and Machinery and on
Furniture should be provided.
iii. Reserve for Doubtful Debts should be created and maintained at 5% on Sundry
Debtors.
iv. Bad Debts during the year amounted to Rs. 800

From the above information, prepare:

a. Profit & Loss Account for the year ended 31st December, 2007
b. Balance Sheet as on that date.

4. Mr. M commenced business on 1 st January 2007 with a capital of Rs. 20,000 cash out
of which Rs. 3,000 were borrowed from his wife. The amount was deposited in a Bank
Account. He has not maintained any books of account for business operations carried out
by him during the year ended on 31st December 2007.

However, he gives you the following information:

Total purchases during the year amounting to Rs. 80,000, 75% of which was sold out at a
gross profit of 50% of cost.

The other details are as under:

Particulars Rs.
Salaries paid 3,000
General Expenses 4,000
Interest allowed by the Bank 100
Rent, Rates and Taxes 2,100

All purchases and sales are on credit basis.

In addition, the following figures are also available as on 31st December 2007.
Particulars Rs.
Furniture 2,000
Bank 13,000
Debtors 8,000
Creditors 6,000
Drawing during the year 4,000

All the payments and receipts are through the bank account. Interest at the rate of 10%
should be provided for on the loan received from wife.

Give Trading Account, and Profit & Loss Account for the year ended 31 st December
2007 and the Balance Sheet as on that date.

5. You are given 1) The Balance Sheet of Mr. A on 31 st March 2007; 2) a Cash account
for the year ended 31st March 2008 and 3) Additional Information.

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S.Y.B.Com. Accountancy & Financial Management Prof. R.N.Savkare

You are required to prepare a Trading Account and Profit & Loss Account for the year
ended 31st March 2008 and a Balance Sheet as on that date.

Balance Sheet as on 31st March 2007

Liabilities Rs. Assets Rs.
Creditors 20,000 Cash 5,000
Bills Payable 40,000 Bank 10,000
Capital 1,00,000 Bills Receivable 20,000
Debtors 25,000
Stock 20,000
Furniture 10,000
Plant 70,000

1,60,000 1,60,000

Cash A/c for the year ended 31st March 2007

Receipts Rs. Payments Rs.
Balance Drawings 12,000
Cash 5,000 Wages 20,000
Bank 10,000 Payment to Creditors 35,000
Cash Sales 35,000 Bills Paid 60,000
Collections from Debtors 80,000 Sundry Expenses 30,000
Bills Receivable 75,000 Rent, Rates and Taxes 20,000
Balance
Cash 3,000
Bank 25,000

2,05,000 2,05,000

Additional Information:
Particulars Rs.
Debtors on 31st March 2008 40,000
Creditors on 31st March 2008 25,000
Bills Receivable on 31st March 2008 30,000
Bills Payable on 31st March 2008 50,000
Stock on 31st March 2008 30,000
Bills Receivable in hand dishonoured during the year 5,000
Bills Payable dishonoured 2,000
Bills receivable endorsed 15,000
Bills receivable as endorsed dishonoured 2,000
Discount Allowed 1,000
Discount Received 2,000