Statement of Affairs

This e-Lecture was Recorded on:
December 18, 2012
Accounts from Incomplete Records

Single Entry System
Module I of IV
CA Intermediate (IPC) Course Paper 1
Accounting Chapter 10
1
The Institute of Chartered Accountants of India
CA. S.S. Prathap
Disclaimer Statement
1
2
3
ICAI, 2012
This lecture has been delivered by faculty members to supplement

the Study Material, Practice Manual and other content
The views expressed in this lecture are of the Faculty Member.
The content of this video lecture has not been specifically discussed
by the Council of the Institute or any of its Committees and the
views expressed herein may not be taken to necessarily represent
the views of the Council or any of its committees
Important Notes
This e-Lecture was Recorded on:

December 18, 2012
The e-Lectures, PPT, Podcasts

and Video lectures on ICAI
Cloud Campus aim to
supplement the Study Material,
Practice Manual and
Supplementary Study Material
The lecture recordings are made

according to the syllabus and
laws existing/ applicable as on
the date of recording.
Due to changes in law, there is

likely to be some time gap
between these changes and the
recording of updated lectures.
Hence, students are advised to

refer to the Study Material
including Supplementary Study
Material, if any, and other
relevant legislation for latest
provisions/ amendments
required for forthcoming
examination.
ICAI, 2012
Agenda - Module 1
Understand what is
Single Entry System or

Accounts from Incomplete Accounts
Statement of Affairs
Debtors & Creditors Velocity
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Accounts from Incomplete Records

Revise Basic Concepts
Provides Strong Foundation
Forms Foundation for entire Accounting
Detective Work
Finding Missing Data using T Accounts

Using Relationship Between
Cost, Profit & Sales
Debtors and Creditors Velocity

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Opening Capital
+
Additional Capital
Drawings
+
Profits
=
Closing Capital
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Illustration I
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On Statement of Affairs
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Illustration 1: Problem Statement

1. The Closing Capital of Mr. Vishnu on 31.03.2007
was D.1,50,000. On 01.04.2006 his capital was
D.60,000. During the year he had drawn D.40,000
for domestic expenses. He introduced D.25,000 as
additional capital in feb.2007. Find out Net Profit for the
year.
(November, 2007).
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Solution of Illus.1 :
Statement of affairs of Mr. Vishnu
Opening capital
Capital introduced
Drawings
Profits
Closing capital
=
=
=
=
=
60,000
25,000
(40,000)
x
1,50,000
Solution :
1,50,000
=
60,000 + 25,000 40,000 + x
1,50,000
=
85,000 40,000 + x
x
=
1,50,000 45,000
Profit
=
1,05,000
PROFIT FOR THE YEAR 06-07 =
1,05,000
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Illustration II
10
On Statement of Affairs
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Illustration II on
2. Find out the Profit of Mr. Adwait from the following
information :
Capital at the beginning of the year
D.20,00,000
Drawings made by Mr. A
D.2,00,000
Capital at the end of the year
D.25,00,000
Additional Capital introduced
D.1,00,000
during the year
(November, 2009)
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Solution to Illustration 2 :
Statement of affairs of Mr. Adwait
Opening capital
Capital introduced
Drawings
Profits
Closing capital
=
=
=
=
=
20,00,000
1,00,000
(2,00,000)
x
25,00,000
Solution :
25,00,000
=
20,00,000 + 1,00,000 2,00,000 + x
25,00,000
=
21,00,000 2,00,000 + x
x
=
25,00,000 19,00,000
Profit
=
6,00,000
PROFIT FOR THE YEAR 08-09 =
6,00,000
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Illustration III
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Provisioning
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Illustration III on Provisioning
3. In a concern, the opening Provision for Doubtful

Debts is D.51,000. During the year a sum of
D.10,000 was Written off as Bad Debt. The closing
balance of Sundry Debtors amounts to D.6,30,000.
It was decided that 10% Of the Debtors is to be
maintained as Provision. Calculate the Closing
Balance towards Provision for Doubtful Debts.
And pass Journal Entry for giving effect to the
Provision maintained.
(May, 2008)
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Solution to Illus.3 :
Provision for bad & doubtful debts

Bad debts
Sundry debtors
10% provision
=
=
=
=
51,000
10,000
6,30,000
63,000
Provision for bad and doubtful debts A/c

To Bad Debts
To bal c/d
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10,000 By opening bal

63,000 By Profit&Loss
51,000
22,000
73,000
73,000
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Journal Entries in the books of ABC Ltd
Bad debts A/c

Dr.
To Sundry debtors A/c
10,000
Prov. for Bad & D.Debts A/c Dr.

To Bad debts A/c
10,000
Profit & Loss A/c Dr.

To Prov. for Bad & D.Debts A/c
22,000
10,000
10,000
22,000
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Relationship
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An Intro.
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Cost, Profit & Sale Relationship

Let us consider the following :
Cost =
100
Profit =
20
Sale =
120
Now,
Profit with respect to Cost = Profit / Cost
= 20/100 = 1/5 on C
Profit with respect to Sales = Profit / Sales
= 20/120 = 1/6 on S
(i.e.,)1/5 C = 1/6 S
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Example for Relationship between

Cost =
Profit =
Sales =
Now,
Profit / Cost
Profit / Sales
90
30
120
=
=
30 / 90
30/120
(i.e.,) 1/3 C
=
=
=
1/3 C
1/4S
1/4 S
The Relationship is, For Sales it will be always one digit

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more in the denominator
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Illustration IV
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Cost, Profit & Sales Relationship
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Illustration IV Relationship of Cost,

Profit & Sales
4. A trader purchased goods for D.1,70,000. The

opening stock of inventory prior to the said
purchase was D.30,000. His sale was D.2,10,000.
Find out the closing stock of inventory if the
gross profit margin is 25 % on Cost.
(November 2009 4 Marks)
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Solution to Illus.4 :
1/4 Cost
Opening stock
Purchases
Profit
1/5 Sales
=
1/5 * 2,10,000
=
42,000
Trading A/c
30,000 Sales
2,10,000
1,70,000 Closing stock
32,000
42,000
2,42,000
Closing stock of Mr. A=
2,42,000
32,000
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Debtors & Creditors Velocity

23
An Intro.
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Debtors Velocity
Also called as Debtors turnover, collection period.
Annual credit sale
Closing debtors
Debtor velocity
24 lacs
4 lacs
=
=
=
24,00,000
4,00,000
?
12 months
?
4* 12
24
= 2 months
Debtors velocity =
2 months
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Creditors velocity
Creditor Velocity
Closing Creditors
ACP
1
12
=
=
=
1 month
50,000
?
50,000
?
50,000 * 12
= 6,00,000
1
ACP
=
6,00,000
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Illustration V
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Debtors Velocity
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Illustration V on Debtors Velocity

5. A company sold 25% of the goods on cash basis
and the balance on credit basis. Debtors are
allowed 2 months Credit and their balance as on
31.03.2008 is D.1,40,000. Assume that the sale is
uniform through out the year. Calculate the total
sales of the company for the year ended
31.3.2008.
(May 2008)
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Solution to Illus.5:
Sundry Debtors
Closing debtors
ACS
Total sales
100 %
Total Sales
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=
=
=
=
ACS =
=
=
=
=
=
=
2 months
1,40,000
1,40,000 * 12
2
8,40,000
8,40,000
cash sales + credit sales
25 % + 75 %
x
+ 8,40,000
2,80,000 + 8,40,000
11,20,000
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11,20,000
Summary
In this module, we studied
Basic concepts of Single Entry System
Provisioning
Relationship between Cost, Profit & Sale
Debtors and Creditors Velocity
We do hope that you would be better prepared to

answer questions on this module for your
forthcoming examinations
ICAI, 2012
29
Thank You
30
ICAI, 2012

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This e-Lecture was Recorded on:

December 18, 2012

Accounts from Incomplete Records

The Institute of Chartered Accountants of India

CA. S.S. Prathap

This lecture has been delivered by faculty members to supplement

The views expressed in this lecture are of the Faculty Member.

This e-Lecture was Recorded on:

The e-Lectures, PPT, Podcasts

The lecture recordings are made

Due to changes in law, there is

Hence, students are advised to

Single Entry System or

Accounts from Incomplete Records

Finding Missing Data using T Accounts

Cost, Profit & Sales

Debtors and Creditors Velocity

Illustration 1: Problem Statement

Illustration III on Provisioning

3. In a concern, the opening Provision for Doubtful

Provision for bad & doubtful debts

Provision for bad and doubtful debts A/c

10,000 By opening bal

Journal Entries in the books of ABC Ltd

Bad debts A/c

Prov. for Bad & D.Debts A/c Dr.

Profit & Loss A/c Dr.

Cost, Profit & Sales

Cost, Profit & Sale Relationship

Example for Relationship between

The Relationship is, For Sales it will be always one digit

Cost, Profit & Sales Relationship

Illustration IV Relationship of Cost,

4. A trader purchased goods for D.1,70,000. The

Closing stock of Mr. A=

Debtors & Creditors Velocity

Illustration V on Debtors Velocity

We do hope that you would be better prepared to

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