ACCOUNTS FROM INCOMPLETE RECORDS (SINGLE ENTRY SYSTEM

PREPARED BY

JAGDISH CHAND

PGT COMMERCE

JNV KOTA (RAJ.)

What is incomplete records OR �What is single entry system?

• Accounting records which are nor prepared according to Double Entry Principles
• “A system of book-keeping in which as a rule, only records of cash and personal accounts are maintained. It always incomplete double entry system varying with circumstances”.

Why Incomplete Records?

• High cost of record keeping
• Lack of knowledge
• Time
• Lack of awareness for the need of financial records

Found in Small Businesses and hence can be termed as Micro Business Accounting(MBA).

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What are recorded?

• Cash transactions
• Credit transactions of revenue goods and capital goods in the personal accounts of Suppliers and Customers.
• Double entry completed for cash receipts and payments on account of Customers and Suppliers.
• Non recurring transactions like purchase of fixed assets, borrowings etc.

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Is there need to convert into double entry system?

• No, if only approximate profit is to be determined.
• Yes, if the results of operations and financial position are to be determined which is required
• for filing Income Tax Returns;
• to obtain loans from financial institutions;
• to analyse the financial statements in a meaningful manner and understand for making rational decisions.

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When no need to convert into double entry

Without converting, how the approximate profit is determined?

1. Find out the amount of capital at the beginning of the year
1. If it’s not given - Prepare statement of affairs for the beginning of the year.
2. Find out the amount of capital at the end of the year
1. If it’s not given - Prepare statement of affairs for the end of the year.
3. Calculate the amount of profit or loss by preparing the following statement.

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STATEMENT OF AFFAIRS

• Liabilities

Bank Overdraft

Sundry Creditors

Outstanding Expenses

Income received in advance

Capital (Balancing figure)

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• Assets

Cash in Hand

Cash at Bank

Sundry Debtors

Bills Receivables

Stock

Prepaid Expenses

Accrued Income

Furniture

Plant & Machinery etc.

FORMULA FOR CALCULATING PROFIT OR LOSS

• Profit = Closing Capital + Drawing-Additional Capital – Opening Capital

Statement of Profit

• Capital at the end of the year/ Closing capital
• Add: Drawings
• Less: Additional capital introduced
• Less: Capital at the beginning of the year
• Profit / loss for the year

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Thanks�