Essentials of single entry System and case study.pptx

Single Entry system
Meaning
Definition
What accounts are Maintained
Features Of Single Entry System
Cash Book, Personal Account
Variations In Application
Preparation of Opening and Closing Statement of Affairs
In the absence of Real Accounts in the books it is not possible to prepare the Balance Sheet of the Firm therefore Opening and Closing Statement of Affairs is prepared to find out opening or closing CAPITAL
Opening Capital = opening Assets – opening Liabilities
Closing Capital = Closing Assets – Closing Liabilities

1. Single Entry System Prof Rossy Mathur M.Phil , M.com(Buss Mgmt ), MBA( Mkt ), M.com, PGDIBO, PGDMM, PGDHE, B.com City Pride Junior College, Nigdi .

2. Meaning Of Single Entry System Single entry system is an incomplete form of recording financial transactions. It is the system, which does not record two aspects or accounts of all the financial transactions. It is the system, which has no fixed set of rules to record the financial transactions of the business.

3. Features Of Single Entry System 1. No Fixed Rules Single entry system is not guided by fixed set of accounting rules for determining the amount of profit and preparing the financial statements. 2. Incomplete System Single entry system is an incomplete system of accounting, which does not record all the aspects of financial transactions of the business.

4. 3. Cash Book Single entry system maintains cash book for recording cash receipts and payments of the business organization during a given period of time. 4. Personal Account Single entry system maintains personal accounts of all the debtors and creditors for determining the amount of credit sales and credit purchases during a given period of time. 5. Variations In Application Single entry system has no fixed set of principles for recording financial transactions and preparing different financial statements. Hence, it has variations in its application from one business to another.

5. Steps to Remember – 1 to 5 Step 1 – Ascertain Opening Capital. Step 2 - Ascertain Closing Capital. Step 3 – Add amount of drawings to Closing Capital. Step 4 – Deduct the amount of Additional capital introduced during the year, from the above, to get Adjusted Capital. Step 5 – Ascertain Profit & Loss by deducting opening capital from adjusted closing capital.

6. Preparation of Opening and Closing Statement of Affairs In the absence of Real Accounts in the books it is not possible to prepare the Balance Sheet of the Firm therefore Opening and Closing Statement of Affairs is prepared to find out opening or closing CAPITAL Opening Capital = opening Assets – opening Liabilities Closing Capital = Closing Assets – Closing Liabilities

7. Statement of Affairs as on 1/4/xxx (Opening Capital) liabilities Rs Assets Rs Creditors xxx Plant & Machinery xxx Bills Payable xxx Furniture & Fixture xxx Bank Overdraft xxx Stock in Trade Xxx Capital ( Bal Fig) xxx Bills Receivable Xxx Debtors Xxx Cash at Bank Xxx Cash in Hand xxx Total xxx Total xxx

8. Statement of Affairs as on 31/3/xxx (Closing Capital)

9. Preparation of Statement of Profit or loss In single entry system the financial position is disclosed by preparing the statement of Affairs, where as the working results is found by preparing statement of P & L. P & L Is Calculated by following Methods 1. Net worth Method 2. Conversion Method ( Conversion Method is not included in XII Syllabus)

10. Net Worth Method Statement of Profit & Loss For the year ended……. Particulars Amt Amt Closing Capital/ Capital at the end of the year xxx Add: Drawings made during the year In Cash In Kind Xxx xxx (+)xxx xxx Less: Additional capital introduced during the year (-)xxx Adjusted closing capital xxx Less : Opening Capital / Capital at the beginning of the year (-)xxx Profit / Loss for the year before adjustments xxxx

11. Adjusted Statement of Profit or Loss ( Contd ) Particulars Amt Rs Amt Rs Add : Incomes & Gains during the year: 1) Interest on Drawings 2) Under valuation of Assets 3) Overvaluation of Liabilities 4) Prepaid expenses Xxx Xxx Xxx xxx (+)xxx Less : Expenses & Losses during the year: 1) Interest on Capital 2) Depreciation on Assets 3) Interest on Loan 4) Overvaluation of Assets 5) Undervaluation of liabilities 6) Bad Debts 7) Reserve for DD 8) Salary to Partners 9) Outstanding Expenses Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx xxx xxxx (-)xxx Net Profit / Net Loss during the year xxxx

12. Problem 2

13. Statement of Affair as on 1 st , April 2012 (Opening Capital) Particulars Amt ( Rs ) Particulars Amt ( Rs ) Creditors 15,000 Cash in hand 10,000 Cash at bank 20,000 Balancing Fig (Opening Capital) 1,33,000 Stock 16,000 Furniture 18,000 Plant and Machinery 60,000 Debtors 24,000 Total 1,48,000 Total 1,48,000 Opening Asset – Opening Liabilities = Opening Capital 148000 – 15000 = 133000

14. Statement of Affair as on 31st, March 2013 (Closing Capital) Particulars (Liabilities) Amt ( Rs ) Particulars (Assets) Amt ( Rs ) Creditors 18,000 Cash in hand 16,000 Cash at bank 36,000 Balancing Fig (Closing Capital) 196000 Stock 24,000 Furniture 18,000 Plant and Machinery 90,000 Debtors 30,000 Total Total 214000 Closing Asset – Closing Liabilities = Closing Capital 214000 - 18,000 = 196000

15. Statement of Profit & Loss as on 31 st , March 2013 Particulars Amount (RS) Amount (RS) Closing Capital 1,96,000 Add : Drawings Cash Kind 10,000 +2000 + 12,000 2,08,000 Less: Additional capital introduced during the year - 2,000 Adjusted closing capital 2,06,000 Less : Opening Capital / Capital at the beginning of the year - 1,33,000 Profit / Loss for the year before adjustments 73,000 Add : Incomes & Gains during the year: xxxx Less : Expenses & Losses during the year: Depreciation on Assets Machinery Furniture 7500 +900 8,400 Net Profit 64,600

16. Working Notes 1. Calculation of Dep on Machinery 2012 opening Bal = 60,000 2013 closing Bal = 90,000 New Mach = 30,000 purchased on 1 st oct 2012 = 6,000 – Full year = 1,500 – 6months = 6,000+1,500 = 7,500 2. Calculation of Dep on Furniture Closing Bal -- 18,000 x 5 = 900 100  

17. Solution Pg 257, Problem no 11. Statement of P & L for the year ended 31 st , March ,2013 Particulars Amt ( Rs ) Amt ( Rs ) Closing Capital ( 31-3-13) Combined 1,04,300 Add: Drawings during the yea X Y Z 4,500 3,500 6,900 + 14,900 1,19,200 Less: Additional capital brought during the year - xxxx Less : Opening Capital (1-4-12 ) Combined - 1,00,000 Adjusted Closing Capital 19,200 Add: Income & Gains Undervaluation of Asset ( Furniture) + 200 19,400 Less: Expenses & Losses Bad debt Overvaluation of Asset (Stock) Interest on Bank Loan 10% RDD Salary to Z 500 x12 300 +400 +1000 +1700 +6000 = 9,400 - 9,400 Net Profit 10,000

18. Thank You For any queries email [email protected]