Accounting for Incomplete Record
Single Entry System of Book-Keeping
Meaning of Single entry System: Single entry system is an incomplete and unsystematic system of recording financial transactions. It is the system, which does not record two aspects of all the financial transactions. It is the system, which has no fixed set of rules to record the financial transactions. It records only one aspect of transaction. According to Choksi, “It is incomplete, inaccurate, unscientific and unsystematic style of account keeping.” Thus, it is not proper system of recording transactions, which fails to present complete information. It mainly maintains cash book and personal accounts of debtors and creditors. It ignores nominal account and real account except cash account. It fails to disclose true profit or loss and financial position of business organization.
Features of single entry system
- Generally, cash and personal accounts of debtors and creditors are maintained
- This system is used to records transactions of small organizations
- Trial balance cannot be prepared.
- There is no fixed accounting rules and principles.
- Cash book is maintained to record cash transactions.
Advantages of single entry system:
- It is simple method of recording transactions.
- It is easy to find profit or loss.
- It is an economical system of recording transactions.
- It does not require large number of books to record transactions.
Disadvantages of single entry system:
- Arithmetical accuracy of transactions cannot be checked.
- It is an incomplete and unsystematic of book-keeping.
- It cannot find out true profit or loss.
- It is difficult to prepare balance sheet.
Step 1 Preparation of statement of affairs
Statement of Affairs
As on……..
| Liabilities | Rs | Assets | Rs |
| Creditors Bank loan Bills payable Outstanding expenses Bank overdraft Advance income Capital ( balance figure) (total assets- total liabilities) | *** | Land and building Plant and machinery Furniture Debtors Bills receivable Cash in hand Cash at bank Prepaid expenses Inventory/closing stock | *** *** *** |
| *** | *** |
Step 2. Determination of profit or loss
Statement of Profit or Loss
For the year ended…
| Particulars | Details | Total |
| Closing capital Add: Drawing during the year Less: Additional capital Less: Interest on capital Adjusted closing capital Less: Opening capital | *** (***) (***) | ………… (***) |
| Profit or loss for the year | ***/(***) |
Prob 1. A New Nepal Trader keeps its books of account on single entry system. The following information is extracted from his books of account.
Opening capital Rs. 200,000 Additional capital Rs. 15,000
Closing capital Rs. 275,000 Interest on capital Rs. 18,000
Drawings Rs. 7,000
Req: Statement of profit and loss
Statement of Profit and Loss
| Particulars | Details Rs. | Total Rs. |
| Closing capital Add: Drawing Less: Additional capital Less: Interest on capital Adjusted closing capital Less: Opening capital | 275,000 7,000 ( 15,000) (18,000) | 249,000 (200,000) |
| Profit for the year | 49000 |
Prob.2 Ananda started business with a capital of Rs. 100,000 on Jan.1,2014. On 31st Dec. 2014 his assets and liabilities are as follows:
Cash in hand Rs. 30,000 Furniture Rs. 13,000
Debtors Rs. 7,000 Sundry creditors Rs. 9,000
Plant and machinery Rs. 25,000 Bank loan Rs. 4,000
Inventory Rs. 6,000
His withdrew Rs. 20,000 during the year. Calculate profit or loss for the year.
Statement of Affair
As on 31st Dec, 2014
| Liabilities | Rs | Assets | Rs. |
| Sundry creditors Bank loan Capital (closing) (bal, fig.) | 9,000 4,000 68,000 | Cash in hand Furniture Debtors Plant and machinery Inventory | 30,000 13,000 7,000 25,000 6,000 |
| 81,000 | 81,000 |
Statement of Profit or Loss
For the year ended 31st Dec, 2014
| Particulars | Details Rs. | Total Rs. |
| Closing capital Add: Drawing during the year Adjusted closing capital Less: Opening capital | 68,000 20,000 | 88,000 (100,000) |
| Loss for the year | ( 12,000) |
Prob.3 A small trader commenced a business on Jan 1, 2014 with a capital of Rs.90,000. His position at the end of the year 2014 revealed:
Marketable security Rs. 51,000 Cash Rs. 20,000
Creditors Rs. 17,000 Debtors Rs. 40,000
Furniture Rs. 14,000 Bank overdraft Rs.16,000
Drawing for personal use during the year amounted to Rs. 15,000. He further invested Rs. 25,000 in his business.
Req: i) Statement of affairs ii) Statement of profit and loss
Statement of Affair
As on Dec. 31, 2014
| liabilities | Rs. | Assets | Rs |
| Creditors Bank overdraft Capital(closing) | 17,000 16,000 92,000 | Marketable securities Cash Debtors Furniture | 51,000 20,000 40,000 14,000 |
| 125,000 | 125,000 |
Statement of Profit or Loss
For the year ended Dec. 31, 2014
| Particulars | Details | Total |
| Closing capital Add: Drawing during the year Less: Additional capital Adjusted closing capital Less: Opening capital | 92,000 15,000 (25,000) | 82,000 ( 90,000) |
| Loss for the year | ( 8,000) |
Prob.4 Ozen Book Suppliers, who keeps his books of account on single entry system, supplied to you the following summary of assets and liabilities of his business for the year ending Chaitra, 2073.
Account receivable Rs. 55,000 Stock in trade Rs. 30,000
Creditors Rs. 60,000 Computer Rs. 60,000
Vehicles Rs. 80,000 Loan Rs. 10,000
Furniture Rs. 20,000
Prepaid rent Rs. 5,000
Capital at the start of the business consisted of cash Rs. 10,000, bank balance Rs. 150,000 and trading goods Rs. 20,000. His monthly drawing was Rs. 600. Depreciation on computer @ 10% p.a.
Req: a) Closing statement of affair b) Statement of profit and loss.
Closing Statement of Affair
As on Chaitra 30, 2073
| Liabilities | Rs. | Assets | Rs |
| Creditors Loan Capital (closing) | 60,000 10,000 174,000 | Account receivables Vehicles Furniture Prepaid rent Stock in trade Computer 60,000 Less: depreciation -6000 | 55,000 80,000 20,000 5,000 30,000 54,000 |
| 244,000 | 244,000 |
Statement of Profit or Loss
For the year ended Chaitra 30, 2073
| Particulars | Details Rs | Total Rs |
| Closing capital Add: Drawing during the year ( 600×12) Adjusted closing capital Less: Opening capital (10,000+150,000+20,000) | 174,000 7,200 | 181,200 180,000 |
| Profit for the year | 1,200 |
Prob.5 A trader keeps his books of account on single entry system and provided the following on 31st Chaitra 2073.
Bills payable Rs.35, 000 Account receivable Rs. 130,000
Closing stock Rs. 30,000 Furniture Rs. 20,000
Prepaid insurance Rs. 5,000 Cash in hand Rs. 20,000
The trader started business on 1st day of 2073 with capital of Rs.150, 000. His drawing during the year amounted to Rs. 6,800. He invested Rs. 15,000 as additional capital and paid Rs. 5,200 as premium on his life insurance. Write off bad debts of Rs. 600 and depreciate furniture by 10% p.a.
Required: a) Closing statement of affairs
b) Amount of profit earned by the trader during the year.
Closing statement of Affairs
As on 31st Chaitra 2073
| Liabilities | Rs | Assets | Rs |
| Bills payable Capital( closing) | 35,000 167,400 | Closing stock Prepaid insurance Account receivables 130,000 Less: Bad debt – 600 Furniture 20,000 Less: Depreciation – 2,000 Cash in hand | 30,000 5,000 129,400 18,000 20,000 |
| 202,400 | 202,400 |
Statement of profit or loss
For the year ended 31st Chaitra 2073
| Particulars | Rs | Rs |
| Closing Capital Add: Drawing during the year(6800+5200) Less: Additional capital Adjusted closing capital Less: Opening capital | 167,400 12,000 (15,000) | 164,400 (150,000) |
| Profit for the year | 14,400 | |
Prob.6 Madan started a business with cash Rs. 40,400 and building Rs. 50,000 on January 1st 2012. His position on December 31st 2012 is as follows:
Bills payable Rs. 30,000 Debtors Rs. 25,000
Plant Rs 40,000 Bank loan Rs. 12,000
Creditors Rs. 10,000 Furniture Rs. 25,000
Bank balance Rs. 22,500 Investment Rs. 32,500
He drew Rs. 49,200 during the year. He introduced further capital Rs. 28,800in the middle of the year.
Additional information: Depreciate furniture by 5% and building by 10%.
Required: a) Closing statement of affairs (closing cap. Rs. 136,750)
b) Statement of profit or loss (profit for the year Rs. 66,750)
