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An account t system, which is not based on double entry is

known as incomplete accounting system or single entry system


Methods which do not strictly adhere to the basic rules of

double entry principles, have come to be known as single entry.


Single

entry method is incomplete, inaccurate, unscientific style of account keeping. It is a mixture of double entry, one entry and no entry.

Reasons for incompleteness


Ignorance on the part of businessmen regarding the

statutory requirements of keeping systematic books of accounts Lack of knowledge of separate entity assumption Deliberate omission to maintain proper records to evade tax It is economical as a fewer books are required to be maintained It is suitable to small concerns which have mainly cash transaction

Limitations for single entry system


Since the two fold aspects of each transaction are not

recorded, trial balance cannot be prepared. Thus the arithmetical accuracy of books of accounts cannot be proved The result of trading obtained under the single entry system is incomplete and also unreliable As nominal accounts are not kept, the profit and loss account is incomplete and unscientific As real accounts are not maintained, balance sheet cannot be prepared to exhibit the true financial position of the business Errors and frauds cannot be easily found out

Ascertainment of profit or loss


Under single entry, where only incomplete records are

kept, the profit or loss can be ascertained by any one of the following methods
Statement of affairs method or capital comparison method 2. Conversion method
1.

1.Statement of affairs method

Statement of affairs It is a statement setting out the assets and liabilities on a given date. Excess of assets over liabilities represents capital It is prepared based on the information collected from various sources Cash in hand by counting or balancing cash book Cash at bank- ascertained from pass book Sundry debtors & Sundry creditors- personal records Stock in hand- actual stock taking and valuation Assets like furniture & machinery etc- makes out a schedule and values them Outstanding, prepaid expenses and accrued incomereliable sources
1.

2.Statement of profit & loss Account


Trading and profit & loss account cannot be prepared from

single entry records because nominal accounts are not kept An approximate figure of profit & loss can be obtained in an indirect way by comparing the figures of capital at the beginning and at the end of the financial period. If capital at the end of the year exceeds the capital in the beginning, there has been a profit. If capital in the beginning is more than at the end, there has been a loss.

Performa statement of profit & loss


Capital at the end of the year 1. Add drawings during the year 2. Less additional capital invested Less capital at the beginning Profit or loss (subject to adjustments) Eg: Interest on capital, interest on drawings, depreciation, outstanding income & expenses, income received in advance, prepaid expenses etc
Xxx Xxx Xxx Xxx Xxx Xxx Xxx

2. Conversion method
(conversion of single entry to double entry)
Here final accounts are to be prepared not with the help of

trial balance but from scattered information given which is equivalent to a trial balance. For this purpose, a summary of all cash transactions should be prepared. This will give information about items like total cash received from customers, total payment to creditors, purchase and sales of assets, total of various expenses, income etc. It also shows the cash sales and cash purchases during the period. The summary will begin with the opening cash and bank balance and must also show the cash in hand and at bank at the close of the period.

Source of information of different items


ITEM Opening capital SOURCE OF INFORMATION Opening balance sheet

Purchases
Sales Opening stock Closing stock Any other asset, depreciation etc Expenses Income Bills receivables

Cash purchase form payment side of cash book; Credit purchase from total creditors account
Cash sales from receipt side of cash book; Credit sales from total debtors account From the list of opening asset From the list of closing asset By preparing the relevant asset account By reference to payment side of cash book and other additional information By reference to receipt side of cash book and other additional information By preparing bills receivables account

Bills payable

By preparing bills payable account

Usual accounts prepared to find out missing figures includes


1.

Total Debtors Accounts


For ascertaining the amount of credit sales, the total debtors account should be prepared

To opening balance of debtors To credit sales To bills receivables dishonored

Xxx Xxx Xxx

By cash received from debtors By bills receivable received By discount allowed By allowances claimed By return inwards By bad debts By transfer to/from creditors By closing balance of debtors

Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx

xxx

xxx

2.TotalCreditors Account
Credit purchases can be ascertained in the same

manner, by preparing a total creditors account

To cash paid to creditors To bills payable accepted To discount received To allowances received To return outwards To transfer to/from debtors

Xxx Xxx Xxx Xxx Xxx Xxx xxx

By opening balance of creditors By credit purchases By bills payable dishonored

Xxx Xxx Xxx

xxx

3.Bills receivables account


All the available items are posted except the missing

item. The balancing figure will be then the missing item

To opening balance To sundry debtors(Bills receivable received)

Xxx Xxx

By cash (realization of bill) By sundry debtors (Bills return dishonored) By closing balance

Xxx Xxx

Xxx

xxx xxx

4.Bills payable account


To cash paid(on account of Xxx bills payable) To sundry creditors(bills Xxx payable dishonored) To closing balance By opening balance By sundry creditors(bills accepted) Xxx Xxx

xxx

xxx

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