CHAPTER 14

ACCOUNTING FROM
INCOMPLETE RECORDS
LEARNING OUTCOMES
After studying this unit, you will be able to–
 Learn how to derive capitals at two different points of time
through statement of affairs.
 Learn the technique of determining profit by comparing
capital at two different points of time.
 Prepare trading and profit and loss account and balance
sheet from incomplete records.

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 14.2 ACCOUNTING

 Single entry system is generally found in sole trading concerns or

partnership firms.
 Single entry system ignores the concept of duality and therefore,
transactions are not recorded in their two-fold aspects.

Types of single entry system

Pure single entry Simple single entry Quasi single entry

Personal accounts,
Only personal Personal accounts
cash book and
accounts are and cash book are
subsidiary books are
maintained maintained
maintained

General
Techniques

Fresh Derivation of
Investment by Information
proprietors/ Techniques from Cash
partners of obtaining Book
complete
accounting
information

Distinction
Analysis of
between
Sales Ledger
Business
and Purchase
Expenses and
Ledger
Drawings

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 ACCOUNTS FROM INCOMPLETE RECORDS 14.3

1. INTRODUCTION
Very often small sole proprietorship and partnership businesses do not maintain
double entry book keeping system. Sometimes they keep record of the cash
transactions and credit transactions only. Sometimes they do not maintain
records of all transactions. But at the end of the accounting period they want to
know the performance and financial position of their businesses. This creates
some special problems to the accountants. This chapter discusses how to
complete the accounts from available incomplete records.
The term “Single Entry System” is popularly used to describe the problems of
accounts from incomplete records. In practice, the quack accountants follow some
hybrid methods. For some transactions they complete double entries. For some
others they just maintain one entry. Still for some others, they even do not pass
any entry. Briefly, this may be stated as incomplete records. The task of the
accountant is to establish linkage among the available information and to finalise
the accounts.
Features
• It is an inaccurate, unscientific and unsystematic method of recording
business transactions.
• There is generally no record of real and personal accounts and, in most of
the cases; a record is kept for cash transactions and personal accounts.
• Cash book mixes up business and personal transactions of the owners.
• There is no uniformity in maintaining the records and the system may differ
from firm to firm depending on the requirements and convenience of each
firm.
• Profit under this system is only an estimate based on available information
and therefore true and correct profits cannot be determined. The same is
the case with the financial position in the absence of a proper balance
sheet.

2. TYPES
A scrutiny of many procedures adopted in maintaining records under single entry
system brings forth the existence of following three types:
(i) Pure single entry: In this, only personal accounts are maintained with the
result that no information is available in respect of cash and bank balances,

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 14.4 ACCOUNTING

sales and purchases, etc. In view of its failure to provide even the basic
information regarding cash etc., this method exists only on paper and has
no practical application.
(ii) Simple single entry: In this, only: (a) personal accounts, and (b) cash book
are maintained. Although these accounts are kept on the basis of double
entry system, postings from cash book are made only to personal accounts
and no other account is to be found in the ledger. Cash received from
debtors or cash paid to creditors is simply noted on the bills issued or
received as the case may be.
(iii) Quasi single entry: In this: (a) personal accounts, (b) cash book, and (c)
some subsidiary books are maintained. The main subsidiary books kept
under this system are Sales book, Purchases book and Bills book. No
separate record is maintained for discounts, which are entered into the
personal accounts. In addition, some scattered information is also available
in respect of few important items of expenses like wages, rent, rates, etc. In
fact, this is the method which is generally adopted as a substitute for
double entry system.

3. ASCERTAINMENT OF PROFIT BY CAPITAL

COMPARISON
This method is also known as Net Worth method or Statement of Affairs
Method.
Closing Capital – Opening Capital = Profit
If detailed information regarding revenue and expenses is not known, it becomes
difficult to prepare profit and loss account. Instead by collecting information
about assets and liabilities, it is easier to prepare balance sheet at two different
points of time. So, while preparing accounts from incomplete records, if sufficient
information is not available, it is better to follow the method of capital
comparison to arrive at the profit figure.
3.1 Methods of Capital Comparison
Capital is increased if there is profit, while capital is reduced if there is loss.
However, if the proprietor/partners made fresh investments in the business,
capital is increased; if they make withdrawal capital is reduced. So while
determining the profit by capital comparison, the following rules should be
followed.

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 ACCOUNTS FROM INCOMPLETE RECORDS 14.5

Particulars `
Capital at the end (a) ….
Add: Drawings ....
Less: Fresh capital introduced .....
Capital at the beginning (b) .....
Profit (a-b) .....
It is clear from the above discussion that to follow the capital comparison method
one should know the opening capital and closing capital. This should be determined
by preparing statement of affairs at the two respective points of time. Capital always
equals assets minus liabilities.
Thus preparation of statement of affairs will require listing up of assets and
liabilities and their amount. The accountant utilises the following sources for the
purpose of finding out the assets and liabilities of a business enterprise:
(i) Cash book for cash balance
(ii) Bank pass book for bank balance
(iii) Personal ledger for debtors and creditors
(iv) Inventory by actual counting and valuation.
(v) As regards fixed assets, he prepares a list of them. The proprietor would
help him by disclosing the original cost and date of purchase. After
deducting reasonable amount of depreciation, the written down or
depreciated value would be included in the Statement of Affairs.
After obtaining all necessary information about assets and liabilities, the next task
of the accountants is to prepare statement of affairs at two different points of
time.
The design of the statement of affairs is just like balance sheet as given below:
Statement of affairs as on...........

Liabilities ` Assets `
Capital (Bal. Fig.) xx Building xx
Loans, Bank overdraft xx Machinery xx
Sundry creditors xx Furniture xx
Bills payable xx Inventory xx
Outstanding expenses Sundry debtors xx

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 14.6 ACCOUNTING

Bills receivable xx
Loans and advances xx
Cash and bank xx
Prepaid expenses xx
xx xx
Now from the statement of affairs prepared for two different dates, opening and
closing capital balances can be obtained.
3.2 Difference between Statement of Affairs and Balance Sheet
Basis Statement of affairs Balance sheet
Reliability It is prepared on the basis of It is based on transactions
transactions partly recorded on recorded strictly on the basis
the basis of double entry book of double entry book keeping;
keeping and partly on the basis each item in the balance sheet
of single entry. Most of the can be verified from the
assets are recorded on the relevant subsidiary books and
basisof estimates, assumptions, ledger. Hence the balance
information gathered from sheet is not only reliable, but
memory rather than records. also dependable.
Capital In this statement, capital is Capital is derived from the
merely a balancing figure capital account in the ledger
being excess of assets over and therefore the total of
capital. Hence assets need not assets side will always be
be equal to liabilities. equal to the total of liabilities
side.
Omission Since this statement is There is no possibility of
prepared on the basis of omission of any item of asset
incomplete records, it is very and liability since all items are
difficult, to locate the assets properly recorded. Moreover,
and liabilities, if they are it is easy to locate the
omitted from the books. missing items since the
balance sheet will not agree.
Basis of The valuation of assets is The valuation of assets is done
Valuation generally done in an arbitrary on scientific basis, that is
manner; therefore no method original cost in the case of new
of valuation is disclosed. assets and depreciated

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 ACCOUNTS FROM INCOMPLETE RECORDS 14.7

amount on the basis of cost

minus depreciation to date for
used assets. Any change in the
method of valuation is
properly disclosed.
Objects The object of preparing this The object of preparing the
statement in the calculation of balance sheet is to ascertain
capital figures in the the financial position on a
beginning and at the end of particular date.
the accounting period
respectively.

3.3 Preparation of Statement of Affairs and Determination of Profit

It has been discussed in Para 3.1 that figures of assets and liabilities should be
collected for preparation of statement of affairs. Given below an example:
Illustration 1
Assets and Liabilities of Mr. X as on 31-12-2015 and 31-12-2016are as follows:
31-12-2015 31-12-2016
` `
Assets
Building 1,00,000 ?
Furniture 50,000 ?
Inventory 1,20,000 2,70,000
Sundry debtors 40,000 90,000
Cash at bank 70,000 85,000
Cash in hand 1,200 3,200
Liabilities
Loans 1,00,000 80,000
Sundry creditors 40,000 70,000
Decided to depreciate building by 2.5% and furniture by 10%. One Life Insurance
Policy of the Proprietor was matured during the period and the amount ` 40,000 is
retained in the business. Proprietor took @ ` 2,000 p.m. for meeting family
expenses.
Prepare Statement of Affairs.

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 14.8 ACCOUNTING

Solution
Statement of Affairs
as on 31-12-2015& 31-12-2016

Liabilities 31-12-15 31-12-16 Assets 31-12-15 31-12-16

` ` ` `
Capital 2,41,200 4,40,700 Building 1,00,000 97,500
(Bal. Fig.) Furniture 50,000 45,000
Loans 1,00,000 80,000 Inventory 1,20,000 2,70,000
Sundry 40,000 70,000 Sundry 40,000 90,000
creditors debtors
Cash at bank 70,000 85,000
Cash in hand 1,200 3,200
3,81,200 5,90,700 3,81,200 5,90,700

Illustration 2
Take figures given in Illustration 1. Find out profit of Mr. X.
Solution
Determination of Profit by applying the method of the capital comparison

`
Capital Balance as on 31-12-2016 4,40,700
Less: Fresh capital introduced (40,000)
4,00,700
Add: Drawings (` 2000 × 12) 24,000
4,24,700
Less: Capital Balance as on 31-12-2015 (2,41,200)
Profit 1,83,500

Note:
• Closing capital is increased due to fresh capital introduction, so it is
deducted.

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 ACCOUNTS FROM INCOMPLETE RECORDS 14.9

• Closing capital was reduced due to withdrawal by proprietor; so it is added

back.
Illustration 3
Aand B are in Partnership having Profit sharing ratio 2:1. The following information
is available about their assets and liabilities:
31-3-2016 31-3-2017
` `
Furniture 1,20,000 ?
Advances 70,000 50,000
Creditors 32,000 30,000
Debtors 40,000 45,000
Inventory 60,000 74,750
Loan 80,000 —
Cash at Bank 50,000 1,40,000
The partners are entitled to salary @ ` 2,000 p.m. They contributed proportionate
capital. Interest is paid @ 6% on capital and charged @ 10% on drawings.
Drawings of A and B
A B
` `
April 30 2,000 —
May 31 — 2000
June 30 4,000 —
Sept. 30 — 6,000
Dec. 31 2,000 —
Feb. 28 — 8,000

On 30th June, they took C as 1/3rd partner who contributed ` 75,000. C is entitled to
share of 9 months’ profit. The new profit ratio becomes 1:1:1. A withdrew his
proportionate share. Depreciate furniture @ 10% p.a., new purchases ` 10,000 may be
depreciated for 1/4th of a year.
Current account as on 31-3-2016: A ` 5,000 (Cr.), B ` 2,000 (Dr.)

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 14.10 ACCOUNTING

Prepare Statement of Profit, Current Accounts of partners and Statement of Affairs as on

31-3-2017.
Solution
Statement of Affairs
As on 31-3-2016and 31-3-2017

Liabilities 31-3-2016 31-3-2017 Assets 31-3-2016 31-3-2017

` ` ` `
Capital A/c’s Furniture 1,20,000 1,17,750
A 1,50,000 75,000 Advances 70,000 50,000
B 75,000 75,000 Inventory 60,000 74,750
C — 75,000 Debtors 40,000 45,000
Loan 80,000 — Cash at bank 50,000 1,40,000
Creditors 32,000 30,000 Current A/c B 2,000 —
Current
A/c’s
A 5,000 74,036*
B — 48,322*
C 50,142*
3,42,000 4,27,500 3,42,000 4,27,500
*See current A/cs.
Notes:
(i) Depreciation on Furniture
10% on ` 1,20,000 12,000
10% on ` 10,000 for 1/4 year 250
12,250
(ii) Furniture as on 31-3-2016
Balance as on 31-3-2016 1,20,000
Add: new purchase 10,000
1,30,000
Less: Depreciation (12,250)
1,17,750

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 ACCOUNTS FROM INCOMPLETE RECORDS 14.11

(iii) Total of Current Accounts as on 31-3-2017

Total of Assets (1,17,750 + 50,000 + 74,750 + 45,000 + 4,27,500
1,40,000)
Less: Fixed Capital (75,000 + 75,000 + 75,000) + Liabilities (2,55,000)
(30,000)
1,72,500
This is after adding salary, interest on capital and deducting drawings and interest
on drawings.
(iv) Interest on Capital : `
A: on 1,50,000 @ 6% for 3 months 2,250
on 75,000 @ 6% for 9 months 3,375
5,625
B: on 75,000 @ 6% for 1 year 4,500
C: on 75,000 @ 6% for 9 months 3,375
7,875
(v) Interest on Drawings :
A: on 2,000 @ 10% for 11 months 183
on 4,000 @ 10% for 9 months 300
on 2,000 @ 10% for 3 months 50
533
B: on 2,000 @ 10% for 10 months 167
on 6,000 @ 10% for 6 months 300
on 8,000 @ 10% for 1 month 67
534

Allocation of Profit `1,15,067

3 months Profit ` 28,767
9 months Profit ` 86,300
A : 2/3 × ` 28,767 + 1/3 ×`86,300 = ` 47,944
B : 1/3 × ` 1,15,067 = ` 38,356
C: 1/3 × ` 86,300 = `28,767
` 1,15,067

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 14.12 ACCOUNTING

Current Accounts
A B C A B C
To Balance b/d — 2,000 — By Balance b/d 5,000 — —
To Drawings 8,000 16,000 — By Salary 24,000 24,000 18,000
To Interest on By Interest on
drawings 533 534 — capital 5,625 4,500 3,375
To Balance c/d 74,036 48,322 50,142 By Share of 47,944 38,356 28,767
(b.f.) Profit
82,569 66,856 50,142 82,569 66,856 50,142

Statement of Profit

`
Current Account Balances as on 31-3-2017 1,72,500
Less: Salary A ` 2,000 × 12 = 24,000
B ` 2,000 × 12 = 24,000
C ` 2,000 × 9 = 18,000 (66,000)
Less: Interest on Capital A 5,625
B 4,500
C 3,375 (13,500)
Add: Drawings A 8,000
B 16,000 24,000
Add: Interest on Drawings A 533
B 534 1,067
1,18,067
Less: Current A/c Balances as on 31-3-2016(` 5,000 – ` 2,000) (3,000)
1,15,067

Illustration 4
The Income Tax Officer, on assessing the income of Shri Moti for the financial years
2015-2016 and 2016-2017 feels that Shri Moti has not disclosed the full income. He
gives you the following particulars of assets and liabilities of Shri Moti as on 1st April,
2015 and 1st April, 2017.

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 ACCOUNTS FROM INCOMPLETE RECORDS 14.13

`
1-4-2015 Assets : Cash in hand 25,500
Inventory 56,000
Sundry debtors 41,500
Land and Building 1,90,000
Wife’s Jewellery 75,000
Liabilities : Owing to Moti’s Brother 40,000
Sundry creditors 35,000
1-4-2017 Assets : Cash in hand 16,000
Inventory 91,500
Sundry debtors 52,500
Land and Building 1,90,000
Motor Car 1,25,000
Wife’s Jewellery 1,25,000
Loan to Moti’s Brother 20,000
Liabilities : Sundry creditors 55,000
During the two years the domestic expenditure was ` 4,000 p.m. The declared
income of the financial years were `1,05,000 for 2015-2016and ` 1,23,000 for
2016-2017respectively.
State whether the Income-tax Officer’s contention is correct. Explain by giving your
workings.
Solution
Capital Account of Shri Moti

1-4-2015 1-4-2017
` ` ` `
Assets
Cash in hand 25,500 16,000
Inventory 56,000 91,500
Sundry debtors 41,500 52,500
Land & Building 1,90,000 1,90,000
Wife’s Jewellery 75,000 1,25,000
Motor Car — 1,25,000
Loan to Moti’s Brother — 20,000

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 14.14 ACCOUNTING

3,88,000 6,20,000
Liabilities:
Owing to Moti’s Brother 40,000 —
Sundry creditors 35,000 75,000 55,000 55,000
Capital 3,13,000 5,65,000
Income during the two years:
Capital as on 1-4-2017 5,65,000
Add: Drawings – Domestic Expenses for the two years (` 4,000 × 96,000
24 months)
6,61,000
Less: Capital as on 1-4-2015 (3,13,000)
Income earned in 2015-2016and2016-2017 3,48,000
Income declared (` 1,05,000 + ` 1,23,000) 2,28,000
Suppressed Income 1,20,000
The Income-tax officer’s contention that Shri Moti has not declared his true
income is correct. Shri Moti’s true income is in excess of the disclosed income by
` 1,20,000.

4. TECHNIQUES OF OBTAINING COMPLETE

ACCOUNTING INFORMATION
When books of accounts are incomplete, it is essential in the first instance to
complete double entry in respect of all transactions. The whole accounting
process should be carefully followed and Trial Balance should be drawn up.
4.1 General Techniques
Where the accounts of a business are incomplete, it is advisable to convert them
first to the double entry system and then to draw up the Profit and Loss Account
and the Balance Sheet, instead of determining the amount of profit/loss by
preparing the statement of affairs. As books of accounts of different firms being
incomplete in varying degrees, it is not possible to suggest a formula which could
uniformly be applied for preparing final accounts therefrom. As a general rule, it
is essential first to start the ledger accounts with the opening balances of assets,
liabilities and the capital. Afterwards, each book of original entry should be
separately dealt with, so as to complete the double entry by posting into the
ledger such entries as have not been posted. For example, If only personal

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accounts have been posted from the Cash Book, debits and credits pertaining to
nominal accounts and real accounts that are not posted, should be posted into
the ledger. If there are Discount Columns in the Cash Book, the totals of discounts
paid and received should be posted to Discounts Allowed and Discounts Received
Accounts respectively, for completing the double entry.
Afterwards, the other subsidiary books, i.e., Purchases Day Book, Sales Day Book,
Return Book and Bills Receivable and Payable, etc. should be totaled up and their
totals posted into the ledger to the debit or credit of the appropriate nominal or
real accounts, the personal aspect of the transactions having been posted already.
When an Accountant is engaged in posting the unposted items from the Cash
Book and other subsidiary books, he may be confronted with a number of
problems. The manner in which some of them may be dealt with is described
below:
(1) In the Cash Book, there might be entered several receipts which have no
connection with the business but which belong to the proprietor, e.g.,
interest collected on his private investment, legacies received by him,
amount contributed by the proprietor from his private resources, etc. All
those amounts should be credited to his capital account. Also the Cash
Book may contain entries in respect of payments for proprietor’s purchases
made by the business. All such items should be debited to his capital
account.
(2) Amounts belonging to the business after collection may have been directly
utilised for acquiring business assets or for meeting certain expenses
instead of being deposited into the Cash Book. On the other hand, the
proprietor may have met some of the business expenses from his private
resources. In that case, the appropriate asset or expense account should be
debited and the source which had provided funds credited.
(3) If cash is short, because the proprietor had withdrawn amount without any
entry having been made in the cash book the proprietor’s capital account
should be debited. In fact, it will be necessary to debit or credit the
proprietor’s capital account in respect of all unidentified amounts which
cannot be adjusted otherwise.
(4) Where the benefit of an item of an expense is received both by the
proprietor and business, then it should be allocated between them on some
equitable basis e.g. rent of premises when the proprietor lives in the same

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premises, should be allocated on the basis of the area occupied by him for
residence.
In the end, it will be possible to extract a Trial Balance. Students are advised
always to do so as it will disclose any mistakes committed in making adjustments.
4.2 Derivation of Information from Cash Book
The analysis of cash as well as bank receipts and payments, should be extensive
but under significant heads, so that various items of income and expenditure can
be posted therefrom into the ledger. However before posting the information
into the ledger the same should be collected in the form of an account, the
specimen whereof is shown below:
Cash and Bank Summary Account for the year ended (assumed figures)

Cash Bank Cash Bank

` ` ` `
To Balance in hand 590 7,400 By Expenses 3,000 -
(opening) (Sundry
payments)
To Sales 6,500 - By Purchases 100 6,000
To Collection from By Sundry creditors - 5,000
debtors - 10,000 By Drawings 1,500 -
By Petty expenses 800 -
By Rent - 1,000
By Electricity and 350 -
water
By Repairs 350 -
By Wages - 1,000
By Balance in Hand 990 4,400
7,090 17,400 7,090 17,400
The important point about incomplete records is that much of the information may
not be readily available and that the relevant information has to be ascertained. A
good point is to prepare Cash and Bank Summary (if not available in proper form
with both sides tallied). The cash and bank balance at the end should be reconciled
with the cash and bank books. Having done so, the various items detailed on the
Summary Statements, should be posted into the ledger.

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It is quite likely that some of the missing information will then be available.
Consider the following about a firm relating to 2016.

`
Cash Balance on 1st Jan., 2016 250
Bank overdraft on 1st Jan., 2016 5,400
Cash purchases 3,000
Collection from Sundry debtors 45,600
Sale of old furniture 750
Purchase of Machinery 12,000
Payment of Sundry creditors 26,370
Expenses 8,450
Fresh Capital brought in 5,000
Drawings 3,230
Cash Balance on 31st Dec., 2016 310
Bank balance on 31st Dec., 2016 1,180
Now prepare the cash and Bank Summary.
Cash and Bank Summary

Dr. Cr.
` `
Cash Balance as on 1-1-2016 250 Bank overdraft 5,400
Collection from Sundry 45,600 Cash purchases 3,000
debtors
Sale of old furniture 750 Purchase of Machinery 12,000
Fresh Capital brought in 5,000 Payment to Sundry creditors 26,370
Balancing figure 8,340 Expenses 8,450
Drawings 3,230
Cash balance on 31-12-2016 310
Bank balance on 31-12-2016 1,180
59,940 59,940

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See that debit side is short by ` 8,340. What may be the possible source of cash
inflow?
May be cash sales.
4.3 Analysis of Sales Ledger and Purchase Ledger
Sales Ledger: It would disclose information pertaining to the opening balance of
the debtors, the goods sold to them on credit during the year, bills receivable
dishonored, if any; cash received from them in the accounting period, discount,
rebate or any other concession allowed to them, receipts of bills receivable,
returns inwards, bad debts written off and transfers. Journal entries must be made
by debiting or crediting the impersonal accounts concerned with contra credit or
debit given to total debtors account.
Analysis of Sales Ledger of the year

Op. Sales Bills Total Cash Dis- Bills Sales Bad Total Balance
Customer Disho- Debits Recd. counts Recd. Returns Debts Credit (cl.)
Balance nored Allw.

From the aforementioned, it will be possible to build up information about sales and
other accounts which can then be posted in totals, if so desired. It would also be
possible to prepare Total Debtors
Account in the following form:
Total Debtors Account (assumed figures)

` `
Opening balance 5,000 Cash/Bank 10,000
Sales 38,000 Discount 500
Bills dishonored 280 Bills receivable 20,000
Interest 100 Bad debts 280
Closing balance 12,600
43,380 43,380

It is evident that any single amount comprised in the total Debtors Account can
be ascertained if the other figures are provided. For instance, if the information
about sales is not available it could be ascertained as a balancing figure, i.e., in

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the total Debtors Account given above, if all other figures are given, amount of
sales on credit basis can be easily ascertained.
Purchases Ledger: Generally speaking, a Purchases Ledger is not as commonly in
existence as the Debtors Ledger for it being convenient to make entries in respect of
outstanding liabilities at the time they are paid rather than when they are incurred.
The information is available in respect of opening balance of the creditors, goods
purchased on credit, bills payable dishonored; cash paid to the creditors during the
year, discount and other concessions obtained, returns outwards and transfers. Here
also, journal entries must be made by debiting or crediting the respective impersonal
accounts. Contra credit or debit being given to total creditor’s account.
If a proper record of return to creditors, discount allowed by them etc., has not
been kept, it will not be possible to write up the Total Creditors A/c. In such a
case, net credit purchase will be ascertained as follows:
Cash paid to Creditors including on account of bills
payable during the period ...................
Closing balance of Creditors and Bills Payable ...................
Total ___________
Less: Opening balance of Creditors and Bills Payable ...................
Net credit purchase during the period ...................
Alternatively
Cash paid to creditors during the period ...................
Add: Bills Payable issued to them ...................
Total __________
Closing balance of Creditors
Less: Opening balance of creditors ...................
Credit Purchases during the period ...................
The information may also be put in the form of an account, just like the Total
Debtors Account.
Nominal Accounts: It is quite likely that the total expenditure shown by balance
of nominal account may contain items of expenditure which do not relate to the
year for which accounts are being prepared and, also, there may exist certain
items of expenditure incurred but not paid, which have not been included therein.

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On that account, each and every account should be adjusted in the manner
shown below (figures assumed):
Cash and Amount Paid out Total Pre Expenses
Particulars Bank of Private Payment for the
Payment Accrued Fund period
1 2 3 4 5 (2+3+4) 6 7 (5-6)
` ` ` ` ` `
Rent & 2,200 300 100 2,600 150 2,450
Rates
Salaries 4,500 500 1,000 6,000 250 5,750
Only the amount entered as “expenses for the period” should be posted to the
respective nominal accounts. A similar adjustment of nominal accounts in respect
of revenue receipt should be made.
Let us continue with the example given in para 4.2. Given some other information,
how to compute credit purchase and credit sale is discussed below:
Opening balance (1-1-2016) `
Inventory 20,000
Sundry creditors 12,300
Sundry debtors 15,000
Closing Balance (31-12-2016)
Inventory 15,000
Sundry creditors 13,800
Sundry debtors 25,600
Discount received during 2016 1,130
Discount allowed 1,870
What are the purchases for 2016? Let us prepare the Sundry Creditors Account.
Sundry Creditors Account
` `
To Cash (example in para 4.2) 26,370 By Balance b/d 12,300
To Discount (received) 1,130 (opening)
To Balance c/d (closing) 13,800 By Purchases (balancing 29,000
figure)
41,300 41,300

© The Institute of Chartered Accountants of India

 ACCOUNTS FROM INCOMPLETE RECORDS 14.21

The credit purchases are ` 29,000; cash purchases are ` 3,000 (example in para
4.2): hence total purchases are ` 32,000.
Likewise prepare the Sundry Debtors Account:
Sundry Debtors Account

` `
To Balance b/d 15,000 By Cash (example in para 45,600
4.2)
To Credit sales (balancing 58,070 By Discount (allowed) 1,870
figure)
By Balance c/d 25,600
73,070 73,070
So total sales = credit sales + cash sales
= ` 58,070 + ` 8,340 (example in para 4.2) = ` 66,410
4.4 Distinction between Business Expenses and Drawings
It has been already stated that often the distinction is not made between business
expenses and drawings. While completing accounts from incomplete records, it is
necessary to scan the business transactions carefully to identify the existence of
drawings.
The main items of drawings are (illustrative):
• rent of premises commonly used for residential as well as business purposes;
• common electricity and telephone bills;
• life insurance premiums of proprietor/partners paid from business cash;
• household expenses met from business cash;
• private loan paid to friends and relatives out of business cash;
• personal gifts made to any friends and relatives out of business cash;
• goods or services taken from the business for personal consumption;
• cash withdrawals to meet family expenses.
So it is necessary to scan the summary of cash transactions, business resources and
their utilisation to assess the nature of drawings and its amount.

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 14.22 ACCOUNTING

4.5 Fresh Investment by proprietors / partners

Like drawings, often fresh investments made by proprietors’ partners are not
readily identifiable. It becomes necessary to scan the business transactions
carefully. Apart from direct cash investment, fresh investments may take the
following shape:
• Money collected and put in the business on maturity of Life Insurance Policy of
the proprietors;
• Interest and dividend of personal investment of the proprietors collected and
put in the business;
• Income from non-business property collected and put in the business.
Unless these items are properly identified and segregated, business income will be
affected and proper statement of affairs cannot be prepared.
Illustration 5
The following information relates to the business of Mr. Shiv Kumar, who requests
you to prepare a Trading and Profit & Loss Account for the year ended 31st March,
2017 and a Balance Sheet as on that date:
(a)
Balance as on Balance as on
31st March, 31st March,
2016 2017
` `
Building 3,20,000 3,60,000
Furniture 60,000 68,000
Motorcar 80,000 80,000
Inventory’s ? 40,000
Bills payable 28,000 16,000
Cash and bank balances 1,80,000 1,04,000
Sundry debtors 1,60,000 ?
Bills receivable 32,000 28,000
Sundry creditors 1,20,000 ?
(b) Cash transactions during the year included the following besides certain other
items:

© The Institute of Chartered Accountants of India

 ACCOUNTS FROM INCOMPLETE RECORDS 14.23

` `
Sale of old papers and Cash purchases 48,000
miscellaneous income 20,000 Payment to creditors 1,84,000
Miscellaneous Trade expenses Cash sales 80,000
(including salaries etc.) 80,000
Collection from debtors 2,00,000
(c) Other information:
• Bills receivable drawn during the year amount to ` 20,000 and Bills
payable accepted ` 16,000.
• Some items of old furniture, whose written down value on 31st March,
2016was
` 20,000 was sold on 30th September, 2016for ` 8,000. Depreciation
is to be provided on Building and Furniture @ 10% p.a. and on
Motorcar @ 20% p.a. Depreciation on sale of furniture to be provided
for 6 months and for additions to Building for whole year.
• Of the Debtors, a sum of ` 8,000 should be written off as Bad Debt
and a reserve for doubtful debts is to be provided @ 2%.
• Mr. Shivkumar has been maintaining a steady gross profit rate of 30%
on turnover.
• Outstanding salary on 31st March, 2016was ` 8,000 and on 31st
March, 2017was ` 10,000. On 31st March, 2016, Profit and Loss
Account had a credit balance of ` 40,000.
• 20% of total sales and total purchases are to be treated as for cash.
• Additions in Furniture Account took place in the beginning of the year
and there was no opening provision for doubtful debts.
Solution
Trading and Profit and Loss Account of Mr. Shiv Kumar
for the year ended 31st March, 2017

` `
To Opening inventory By Sales (3,20,000 x 100/80) 4,00,000
(balancing figure) 80,000 By Closing inventory 40,000
To Purchases 2,40,000
(1,92,000 x 100/80)

© The Institute of Chartered Accountants of India

 14.24 ACCOUNTING

To Gross profit c/d

@ 30% on sales 1,20,000
4,40,000 4,40,000
To Miscellaneous expenses By Gross profit b/d 1,20,000
(` 80,000 – ` 8,000 + By Miscellaneous receipts 20,000
` 10,000) 82,000 By Net loss transferred to 25,840
Capital A/c (b.f.)
To Depreciation:
Building ` 36,000
Furniture ` 7,800
(`6,800 + `1,000)
Motor Car ` 16,000 59,800
To Loss on sale of furniture 11,000
To Bad debts 8,000
To Provision for doubtful
debts 5,040
1,65,840 1,65,840

Balance Sheet of Mr. Shivkumar

as on 31st March, 2017
Liabilities ` ` Assets ` `
Capital as on 1st 7,16,000 Building 3,20,000
April, 2016 Add: Addition 40,000
during the year
Profit and Loss Less: Provision for 3,60,000
A/c 40,000 depreciation (36,000)
Opening balance 3,24,000
Less: Loss for the Furniture 60,000
year (25,840) 14,160 Less: Sold during
Sundry creditors 1,12,000 the year (20,000)
Bills payable 16,000 40,000
Outstanding 10,000 Add: Addition
salary during the year 28,000
68,000

© The Institute of Chartered Accountants of India

 ACCOUNTS FROM INCOMPLETE RECORDS 14.25

Less: Depreciation (6,800) 61,200

Motor car (at 80,000
cost)
Less: Depreciation (16,000) 64,000
Inventory in trade 40,000
Sundry debtors 2,52,000
Less: Provision for
doubtful debts
@ 2% (5,040) 2,46,960
Bills receivable 28,000
Cash in hand and at bank 1,04,000
8,68,160 8,68,160

Working Notes:
(i) Sundry Debtors Account

` `
To Balance b/d 1,60,000 By Cash/Bank A/c 2,00,000
To Sales A/c (credit) 1 3,20,000 By Bills Receivable A/c 20,000
By Bad debts A/c 8,000
By Balance c/d (bal. fig.) 2,52,000
4,80,000 4,80,000

(ii) Sundry Creditors Account

` `
To Cash/Bank A/c 1,84,000 By Balance b/d 1,20,000
To Bills Payable A/c 16,000 By Purchases A/c 2
1,92,000
To Balance c/d
(bal. fig.) 1,12,000
3,12,000 3,12,000

1 Total sales (80,000 x 100/ 20) – cash sales (80,000)

2 Total purchases (48,000 x 100/ 20) – cash purchases (48,000)

© The Institute of Chartered Accountants of India

 14.26 ACCOUNTING

(iii) Bills Receivable Account

` `
To Balance b/d 32,000 By Cash/ Bank A/c(bal. fig.) 24,000
To Sundry Debtors A/c 20,000 By Balance c/d 28,000
52,000 52,000
(iv) Bills Payable Account
` `
To Cash/Bank A/c (bal. fig.) 28,000 By Balance b/d 28,000
To Balance c/d 16,000 By Sundry Creditors A/c 16,000
44,000 44,000
(v) Furniture Account
` `
To Balance b/d 60,000 By Bank/Cash A/c 8,000
To Bank A/c (b.f.) 28,000 By Depreciation A/c (on 1,000
furniture sold)
By Profit and loss A/c (loss on 11,000
sale) (20,000 – 1,000 – 8,000)
By Depreciation A/c (68,000 x 6,800
10%)
By Balance c/d (68,000 – 6,800) 61,200
88,000 88,000

(vi) Cash/Bank Account

` `
To Balance b/d 1,80,000 By Misc. trade expenses A/c 80,000
To Miscellaneous receipts A/c 20,000 By Purchases A/c 48,000
To Sundry debtors A/c 2,00,000 By Furniture A/c 28,000
To Sales A/c 80,000 By Sundry creditors A/c 1,84,000
To Furniture A/c (sale) 8,000 By Bills payable A/c 28,000
To Bills receivable A/c 24,000 By Building A/c (3,60,000 – 40,000
3,20,000)
By Balance c/d 1,04,000
5,12,000 5,12,000

© The Institute of Chartered Accountants of India

 ACCOUNTS FROM INCOMPLETE RECORDS 14.27

(vii) Opening Balance Sheet of Mr. Shivkumar as on 31st March, 2016

Liabilities ` Assets `
Capital (balancing figure) 7,16,000 Building 3,20,000
Profit and loss A/c 40,000 Furniture 60,000
Sundry Creditors 1,20,000 Motor car 80,000
Bills Payable 28,000 Inventory in trade 80,000
Outstanding salary 8,000 Sundry Debtors 1,60,000
Bills Receivable 32,000
Cash in hand and at
bank 1,80,000
9,12,000 9,12,000

Illustration 6
A. Adamjee keeps his books on single entry basis. The analysis of the cash book for
the year ended on 31st December, 2016 is given below:

Receipts ` Payments `
Bank Balance as on 1st January, Payments to Sundry
2016 2,800 creditors 35,000
Received from Sundry Debtors 48,000 Salaries 6,500
Cash Sales 11,000 General expenses 2,500
Capital brought during the year 6,000 Rent and Taxes 1,500
Interest on Investments 200 Drawings 3,600
Cash purchases 12,000
Balance at Bank on 31st
Dec., 2016 6,400
Cash in hand on 31st
Dec., 2016 500
68,000 68,000

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 14.28 ACCOUNTING

Particulars of other assets and liabilities are as follows:

1st January, 31st December,

2016 2016
Sundry debtors 14,500 17,600
Sundry creditors 5,800 7,900
Machinery 7,500 7,500
Furniture 1,200 1,200
Inventory 3,900 5,700
Investments 5,000 5,000
Prepare final accounts for the year ending 31st December, 2016 after providing
depreciation at 10 per cent on machinery and furniture and ` 800 against doubtful
debts.
Solution
A. Adamjee
Trading and Profit & Loss Account for the year ended 31-12-2016
` ` `
To Opening Inventory 3,900 By Sales 62,100
To Purchases 49,100 By Closing Inventory 5,700
To Gross profit c/d (b.f.) 14,800
67,800 67,800
To Salaries 6,500 By Gross Profit b/d 14,800
To Rent and Taxes 1,500 By Interest on 200
investment
To General expenses 2,500
To Depreciation :
Machinery @ 10% 750
Furniture @ 10% 120 870
To Provision for doubtful 800
debts
To Balance being profit
carried to Capital A/c (b.f.) 2,830
15,000 15,000

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 ACCOUNTS FROM INCOMPLETE RECORDS 14.29

Balance Sheet as on 31st December, 2016

Liabilities ` ` Assets ` `
A. Adamjee’s Capital Machinery 7,500
on 1st January, 2016 29,100 Less : Depreciation (750) 6,750
Add: Fresh Capital 6,000 Furniture 1,200
Add:Profit for the 2,830 Less : Depreciation (120) 1,080
year
37,930
Less: Drawings (3,600) 34,330 Inventory-in-trade 5,700
Sundry debtors 17,600
Sundry creditors 7,900 Less : Provision for
Doubtful debts (800) 16,800
Investment 5,000
Cash at bank 6,400
Cash in hand 500
42,230 42,230

Working Notes:
1. Balance sheet of A. Adamjee as on 1-1-2016

` `
Sundry creditors 5,800 Machinery 7,500
A. Adamjee’s capital 29,100 Furniture 1,200
(balancing figure) Inventory 3,900
Sundry debtors 14,500
Investments 5,000
Bank balance (from Cash 2,800
statement)
34,900 34,900

© The Institute of Chartered Accountants of India

 14.30 ACCOUNTING

2. Ledger Accounts
A. Adamjee’s Capital Account

` `
Dec. 31 To Drawings 3,600 Jan. 1 By Balance 29,100
Dec. 31 To Balance c/d 31,500 Dec. By Cash 6,000
(b.f.) 31
35,100 35,100

Sales Account

` `
Dec. 31 To Trading 62,100 Dec. 31 By Cash 11,000
A/c (b.f.)
Dec. 31 By Total Debtors 51,100
Account
62,100 62,100

Total Debtors Account

` `
Jan. 1 To Balance b/d 14,500 Dec. 31 By Cash 48,000
Dec. 31 To Credit sales 51,100 Dec. 31 By Balance c/d 17,600
(Balancing
figure)
65,600 65,600
Jan. 1 To Balance b/d 17,600

Purchases Account

` `
Dec. 31 To Cash A/c 12,000 Dec. 31 By Trading
Account (b.f.) 49,100
To Total Creditors
A/c 37,100
49,100 49,100

© The Institute of Chartered Accountants of India

 ACCOUNTS FROM INCOMPLETE RECORDS 14.31

Total Creditors Account

` `
Dec. 31 To Cash 35,000 Jan. 1 By Balance b/d 5,800
Dec. 31 To Balance 7,900 Dec. 31 By Credit Purchases 37,100
b/d (Balancing figure)
42,900 42,900

Illustration 7
From the following data, you are required to prepare a Trading and Profit and Loss
Account for the year ended 31st March, 2017and a Balance Sheet as at that date.
All workings should form part of your answer.
Assets and Liabilities As on1st April As on31st March
2016 2017
` `
Creditors 15,770 12,400
Sundry expenses outstanding 600 330
Sundry Assets 11,610 12,040
Inventory in trade 8,040 11,120
Cash in hand and at bank 6,960 8,080
Trade debtors ? 17,870
Details relating to transactions in the
year:
Cash and discount credited to debtors 64,000
Sales return 1,450
Bad debts 420
Sales (cash and credit) 71,810
Discount allowed by trade creditors 700
Purchase returns 400
Additional capital-paid into Bank 8,500
Realisations from debtors-paid into 62,500
Bank
Cash purchases 1,030
Cash expenses 9,570

© The Institute of Chartered Accountants of India

 14.32 ACCOUNTING

Paid by cheque for machinery 430

purchased
Household expenses drawn from Bank 3,180
Cash paid into Bank 5,000
Cash drawn from Bank 9,240
Cash in hand on 31-3-2017 1,200
Cheques issued to trade creditors 60,270

Solution
Trading and Profit & Loss Account for the year ending 31st March, 2017
` ` ` `
To Opening Inventory 8,040 By Sales
Cash 4,600
To Purchases (58,000 + 59,030 Credit 67,210
1,030)
Less: Returns (400) 58,630 71,810
To Gross profit c/d (b.f.) 14,810 Less: Returns (1,450) 70,360
By Closing
inventory 11,120
81,480 81,480
To Sundry expenses 9,300 By Gross profit 14,810
(W.N.(v)) b/d
To Discount 1,500 By Discount 700
To Bad Debts 420
To Net Profit transfer to
Capital (b.f.) 4,290
15,510 15,510

Balance Sheet of M/s ....

as on 31st March, 2017
Liabilities ` ` Assets `
Capital Sundry assets 12,040
Opening balance 26,770 Inventory in trade 11,120
Add: Addition 8,500 Sundry debtors 17,870

© The Institute of Chartered Accountants of India

 ACCOUNTS FROM INCOMPLETE RECORDS 14.33

Net Profit 4,290 Cash in hand & at 8,080

bank
39,560
Less: Drawings (3,180) 36,380
Sundry creditors 12,400
Outstanding expenses 330
49,110 49,110

Working Notes:
(i) Cash sales
Combined Cash & Bank Account
` `
To Balance b/d 6,960 By Sundry creditors 60,270
To Sundries (Contra) 5,000 By Sundries (Contra) 5,000
To Sundries (Contra) 9,240 By Sundries (Contra) 9,240
To Sundry debtors 62,500 By Drawings 3,180
To Capital A/c 8,500 By Machinery 430
To Sales (Cash Sales-Balancing 4,600 By Sundry expenses 9,570
Figure)
By Purchases 1,030
By Balance c/d 8,080
96,800 96,800

(ii) Total Debtors Account

` `
To Balance b/d 16,530 By Bank 62,500
(Balancing figure) By Discount(64,000 - 62,500) 1,500
To Sales (71,810–4,600 ) 3
67,210 By Return Inward 1,450
By Bad Debts 420
By Balance c/d 17,870
83,740 83,740

3 From combined cash and bank account

© The Institute of Chartered Accountants of India

 14.34 ACCOUNTING

(iii) Total Creditors Account

` `
To Bank 60,270 By Balance b/d 15,770
To Discount 700 By Purchases 58,000
To Return Outward 400 (Balancing figure)
To Balance c/d 12,400
73,770 73,770

(iv) Balance Sheet as on 1st April, 2016

Liabilities ` Assets `
Capital (balancing figure) 26,770 Sundry Assets 11,610
Sundry Creditors 15,770 Inventory in Trade 8,040
Outstanding Expenses 600 Sundry Debtors (from total 16,530
debtors A/c)
Cash in hand & at bank 6,960
43,140 43,140

(v)

Expenses paid in Cash 9,570

Add : Outstanding on 31-3-2017 330
9,900
Less : Outstanding on 1-4-2016 (600)
9,300

(vi) Due to lack of information, depreciation has not been provided on fixed
assets.
Illustration 8
Mr. Anup runs a wholesale business where in all purchases and sales are made on
credit. He furnishes the following closing balances:
31-12-2015 31-12-2016
Sundry debtors 70,000 92,000
Bills receivable 15,000 6,000

© The Institute of Chartered Accountants of India

 ACCOUNTS FROM INCOMPLETE RECORDS 14.35

Bills payable 12,000 14,000

Sundry creditors 40,000 56,000
Inventory 1,10,000 1,90,000
Bank 90,000 87,000
Cash 5,200 5,300

Summary of cash transactions during the year 2016:

(i) Deposited to bank after payment of shop expenses @ ` 600 p.m., salary @
` 9,200 p.m. and personal expenses @ ` 1,400 p.m. ` 7,62,750.
(ii) Withdrawals ` 1,21,000.
(iii) Cash payment to suppliers ` 77,200 for supplies and ` 25,000 for furniture.
(iv) Cheques collected from customers but dishonoured ` 5,700.
(v) Bills accepted by customers ` 40,000.
(vi) Bills endorsed ` 10,000.
(vii) Bills discounted ` 20,000, discount ` 750.
(viii) Bills matured and duly collected ` 16,000.
(ix) Bills accepted ` 24,000.
(x) Paid suppliers by cheque ` 3,20,000.
(xi) Received ` 20,000 on maturity of one LIC policy of the proprietor by cheque.
(xii) Rent received ` 14,000 by cheque for the premises owned by proprietor.
(xiii) A building was purchased on 30-11-2016 for opening a branch for ` 3,50,000
and some expenses were incurred on this building, details of which are not
maintained.
(xiv) Electricity and telephone bills paid by cash ` 18,700, due ` 2,200.
Other transactions:
(i) Claim against the firm for damage ` 1,55,000 is under legal dispute. Legal
expenses ` 17,000. The firm anticipates defeat in the suit.
(ii) Goods returned to suppliers ` 4,200.
(iii) Goods returned by customers ` 1,200.
(iv) Discount offered by suppliers ` 2,700.
(v) Discount offered to the customers ` 2,400.

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 14.36 ACCOUNTING

(vi) The business is carried on at the rented premises for an annual rent of
` 20,000 which is outstanding at the year end.
Prepare Trading and Profit & Loss Account of Mr. Anup for the year ended 31-12-
2016 and Balance Sheet as on that date.
Solution
Trading and Profit & Loss Account of Mr. Anup
for the year ended 31-12-2016
` ` ` `
To Opening 1,10,000 By Sales 9,59,750
Inventory
To Purchases 4,54,100 Less: Sales
Return (1,200) 9,58,550
Less: Purchases By Closing 1,90,000
Return (4,200) 4,49,900 Inventory
To Gross Profit (b.f.) 5,88,650
11,48,550 11,48,550
To salary (9,200 x 1,10,400 By Gross Profit 5,88,650
12)
To Electricity & Tel. By Discount 2,700
Charges (18,700 + 20,900
2,200)
To Legal expenses 17,000
To Discount (2,400 3,150
+ 750)
To Shop exp. (600 x 7,200
12)
To Provision for 1,55,000
claims for damages
To Shop Rent 20,000
To Net Profit (b.f.) 2,57,700
5,91,350 5,91,350

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 ACCOUNTS FROM INCOMPLETE RECORDS 14.37

Balance-Sheet as on 31-12-2016
Liabilities ` Assets `
Capital A/c (W.N.vi) 2,38,200 Building (from 3,72,000
summary cash
and bank A/c)
Add : Fresh capital introduced Furniture 25,000
Maturity value from LIC 20,000 Inventory 1,90,000
Rent 14,000 Sundry debtors 92,000
Add : Net Profit 2,57,700 Bills receivable 6,000
5,29,900 Cash at Bank 87,000
Less : Drawing(14,00 x12) (16,800) 5,13,100 Cash in Hand 5,300
Rent outstanding 20,000
Sundry creditors 56,000
Bills Payable 14,000
Outstanding expenses
Legal Exp. 17,000
Electricity &
Telephone charges 2,200 19,200
Provision for claims for 1,55,000
damages
7,77,300 7,77,300

Working Notes :
(i) Sundry Debtors Account
` `
To Balance b/d 70,000 By Bill Receivable A/c
To Bill receivable A/c-Bills 3,000 Bills accepted by 40,000
dishonoured customers
To Bank A/c-Cheque 5,700 By Bank A/c - 5,700
dishonoured Cheque received
To Credit sales (Balancing 9,59,750 By Cash (from 8,97,150
Figure) summary cash and
bank account)
By Return inward A/c 1,200

© The Institute of Chartered Accountants of India

 14.38 ACCOUNTING

By Discount A/c 2,400

By Balance c/d 92,000
10,38,450 10,38,450
(ii) Bills Receivable Account

` `
To Balance b/d 15,000 By Sundry creditors A/c
To Sundry Debtors A/c 40,000 (Bills endorsed) 10,000
(Bills accepted) By Bank A/c (20,000 – 19,250
750)
By Discount A/c(Bills 750
discounted)
By Bank
Bills collected on maturity 16,000
By Sundry debtors
Bills dishonoured (Bal. 3,000
Fig)
By Balance c/d 6,000
55,000 55,000
(iii) Sundry Creditors Account

` `
To Bank 3,20,000 By Balance c/d 40,000
To Cash 77,200 By Credit purchase
(Balancing figure) 4,54,100
To Bill Payable A/c 24,000
To Bill Receivable A/c 10,000
To Return Outward A/c 4,200
To Discount Received A/c 2,700
To Balance b/d 56,000
4,94,100 4,94,100

© The Institute of Chartered Accountants of India

 ACCOUNTS FROM INCOMPLETE RECORDS 14.39

(iv) Bills Payable A/c

` `
To Bank A/c (Balance 22,000 By Balance b/d 12,000
figure)
To Balance c/d 14,000 By Sundry creditors A/c
Bills accepted 24,000
36,000 36,000

(v) Summary Cash and Bank A/c

Cash Bank Cash Bank
` ` ` `
To Balance b/d 5,200 90,000 By Bank 7,62,750
To Sundry debtors By Cash 1,21,000
(Bal. Fig) 8,97,150 By Shop exp. (600 7,200
x 12)
To Cash 7,62,750 By salary (9,200 x 1,10,400
12)
To Bank 1,21,000 By Drawing A/c 16,800
(1,400 x 12)
By Bills Payable 22,000
To S. Debtors 5,700 By Sundry 77,200 3,20,000
creditors
To Bills receivable 19,250 By Furniture 25,000
To Bills receivable 16,000 By Sundry 5,700
Debtors
To Capital (maturity 20,000 By Electricity & 18,700
value of LIC policy) Tel. Charges
To Capital (Rent By Building (Bal.
received) 14,000 fig) 3,72,000
By Balance c/d 5,300 87,000
10,23,350 9,27,700 10,23,350 9,27,700

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 14.40 ACCOUNTING

(vi) Statement of Affairs as on 31-12-2015

Liabilities ` Assets `
Sundry Creditors 40,000 Inventory 1,10,000
Bills Payable 12,000 Debtors 70,000
Capital (Balancing figure) 2,38,200 Bills receivable 15,000
Cash at Bank 90,000
Cash in Hand 5,200
2,90,200 2,90,200

Illustration 9
Ms. Rashmi furnishes you with the following information relating to her business:
(a) Assets and liabilities as on 1.1.2016 31.12.2016

` `
Furniture (w.d.v) 12,000 12,700
Inventory at cost 16,000 14,000
Sundry Debtors 32,000 ?
Sundry Creditors 22,000 30,000
Prepaid expenses 1,200 1,400
Unpaid expenses 4,000 3,600
Cash in hand and at bank 2,400 1,250

(b) Receipts and payments during 2016:

Collections from debtors, after allowing discount of ` 3,000 amounted to
` 1,17,000.
Collections on discounting of bills of exchange, after deduction of discount of
` 250 by the bank, totalled to ` 12,250.
Creditors of ` 80,000 were paid ` 78,400 in full settlement of their dues.
Payment for freight inwards ` 6,000.
Amount withdrawn for personal use ` 14,000.
Payment for office furniture ` 2,000.

© The Institute of Chartered Accountants of India

 ACCOUNTS FROM INCOMPLETE RECORDS 14.41

Investment carrying annual interest of 4% were purchased at `192 (face value

` 200) on 1st July, 2016and payment made there for.
Expenses including salaries paid ` 29,000.
Miscellaneous receipts ` 1,000.
(c) Bills of exchange drawn on and accepted by customers during the year
amounted to ` 20,000. Of these, bills of exchange of ` 4,000 were endorsed in
favour of creditors. An endorsed bill of exchange of ` 800 was dishonoured.
(d) Goods costing ` 1,800 were used as advertising materials.
(e) Goods are invariably sold to show a gross profit of 33-1/3% on sales.
(f) Difference in cash book, if any, is to be treated as further drawing or
introduction of capital by Ms. Rashmi.
(g) Provide at 2.5% for doubtful debts on closing debtors.
Rashmi asks you to prepare trading and profit and loss account for the year
ended 31st December, 2016and the balance sheet as on that date.
Solution
Trading and Profit and Loss Account of Ms. Rashmi
for the year ended 31st December, 2016
` `
To Opening Inventory 16,000 By Sales (W.N.3) 1,46,100
To Purchases (W.N.2) 91,200 By Closing inventory 14,000
Less : For advertising (1,800) 89,400
To Freight inwards 6,000
To Gross profit c/d @ 48,700
33-1/3%
1,60,100 1,60,100
To Sundry expenses 28,400 By Gross profit b/d 48,700
(W.N.6)
To Advertisement 1,800 By Interest on 4
To Discount allowed investment (200 x
4/100 x ½)
Debtors 3,000 By Discount received 1,600
Bills Receivable 250 3,250 By Miscellaneous income 1,000

© The Institute of Chartered Accountants of India

 14.42 ACCOUNTING

To Depreciation on 1,300
furniture (12,000 +
2,000 – 12,700)
To Provision for 972
doubtful debts
To Net Profit (b.f.) 15,582
51,304 51,304
Balance Sheet as on 31st December, 2016

Liabilities Amount Assets Amount

` ` ` `
Capital as on 37,600 Furniture (w.d.v.) 12,000
1.1.2016 (W.N.1) Additions during the
Less: Drawings (15,808) Year 2,000
21,792 Less: Depreciation (1,300) 12,700
(b.f.)
Add: Net Profit 15,582 37,374 Investment 192
Sundry creditors 30,000 Interest accrued (200 4
x 4% x 6/12)
Outstanding 3,600 Closing Inventory 14,000
expenses Sundry debtors 38,900
Less: Provision for
doubtful debts 972 37,928
@ 2.5%
Bills receivable 3,500
(W.N.7)
Cash in hand and at
bank 1,250
Prepaid expenses 1,400
70,974 70,974

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 ACCOUNTS FROM INCOMPLETE RECORDS 14.43

Working Notes:
(1) Capital on 1st January, 2016
Balance Sheet As On 1st January, 2016

Liabilities ` Assets `
Capital (Bal.fig.) 37,600 Furniture (w.d.v.) 12,000
Creditors 22,000 Inventory at cost 16,000
Outstanding expenses 4,000 Sundry debtors 32,000
Cash in hand and at bank 2,400
Prepaid expenses 1,200
63,600 63,600

(2) Purchases made during the year

Sundry Creditors Account

` `
To Cash and bank A/c 78,400 By Balance b/d 22,000
To Discount received A/c 1,600 By Sundry debtors A/c 800
(80,000 – 78,400)
To Bills Receivable A/c 4,000 By Purchases A/c 91,200
To Balance c/d 30,000 (Balancing figure)
1,14,000 1,14,000

(3) Sales made during the year

`
Opening inventory 16,000
Purchases 91,200
Less: For advertising (1,800) 89,400
Freight inwards 6,000
1,11,400
Less: Closing inventory (14,000)
Cost of goods sold 97,400
Add: Gross profit (@ 50% on cost) 48,700
1,46,100

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 14.44 ACCOUNTING

(4) Debtors on 31st December, 2016

Sundry Debtors Account
` `
To Balance b/d 32,000 By Cash and bank A/c 1,17,000
To Sales A/c (W.N.3) 1,46,100 By Discount allowed A/c 3,000
To Sundry creditors A/c By Bills receivable A/c 20,000
(bill dishonoured) 800 By Balance c/d (Bal. fig.) 38,900
1,78,900 1,78,900
(5) Additional drawings by Ms. Rashmi
Cash and Bank Account
` `
To Balance b/d 2,400 By Freight inwards A/c 6,000
To Sundry debtors A/c 1,17,000 By Furniture A/c 2,000
To Bills Receivable A/c 12,250 By Investment A/c 192
To Miscellaneous income A/c 1,000 By Expenses A/c 29,000
By Creditors A/c 78,400
By Drawings A/c 15,808
[` 14,000 + ` 1,808 (b.f.)
(Additional drawings)]
By Balance c/d 1,250
1,32,650 1,32,650
(6) Amount of expenses debited to Profit and Loss A/c
Sundry Expenses Account
` `
To Prepaid expenses A/c 1,200 By Outstanding expenses A/c 4,000
(on 1.1.2016) (on 1.1.2014)
To Bank A/c 29,000 By Profit and Loss A/c
To Outstanding 3,600 (Balancing figure) 28,400
expenses A/c (on
31.12.2016)
By Prepaid expenses A/c 1,400
33,800 33,800

© The Institute of Chartered Accountants of India

 ACCOUNTS FROM INCOMPLETE RECORDS 14.45

(7) Bills Receivable on 31st December, 2016

Bills Receivable Account
` `
To Debtors A/c 20,000 By Creditors A/c 4,000
By Bank A/c 12,250
By Discount on bills receivable 250
A/c
By Balance c/d (Balancing figure) 3,500
20,000 20,000

SUMMARY
• Single entry system is generally found in sole trading concerns or even in
partnership firms to some extent but never in case of limited liability
companies on account of legal requirements.
• There are basically 3 types of single entry systems:
(i) Pure Single Entry
(ii) Simple Single Entry
(iii) Quasi Single Entry
• Single entry system ignores the concept of duality and therefore, transactions
are not recorded in their two-fold aspects.

TEST YOUR KNOWLEDGE

MCQs
1. In case of net worth method, profit is determined by
(a) Preparing a trading and profit and loss account.
(b) Comparing the capital in the beginning with the capital at the end of
the accounting period.
(c) Comparing the net assets in the beginning with the net assets at the
end of the accounting period.
2. Single entry system can be followed by
(a) Small firms.
(b) Joint stock companies.

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 14.46 ACCOUNTING

(c) Co-operative societies.

3. Closing capital is calculated as
(a) Opening capital +Additional capital -Drawings.
(b) Opening capital +Additional capital –Drawings + Profit.
(c) Opening capital +Additional capital +Drawings - Profit.
4. Under single entry system, only personal accounts are kept and in some
cases
(a) Cash book is maintained;
(b) Fixed assets’ accounts are maintained;
(c) Liabilities’ accounts are maintained.
5. The closing capital of Mr. B as on 31.3.2016 was `4,00,000. On 1.4.2015 his
capital was ` 3,50,000. His net profit for the year ended 31.3.2016 was
` 1,00,000. He introduced `30,000 as additional capital in February, 2016.
Find out the amount drawn by Mr. B for his domestic expenses.
(a) `1,00,000;
(b) `80,000;
(c) `1,20,000;
Theory Questions
1. What is meant by Single entry System? What are the types of procedures
adopted for this system?
Practical Questions
Question1
Question A company sold 20% of the goods on cash basis and the balance on
credit basis. Debtors are allowed 1½ month's credit and their balance as on
31.03.2016 is ` 1,25,000. Assume that the sale is uniform through out the year.
Calculate the credit sales and total sales of the company for the year ended
31.03.2016.
Question 2
The following is the Balance Sheet of the retail business of Sri Srinivas as at 31st
December, 2015:

© The Institute of Chartered Accountants of India

 ACCOUNTS FROM INCOMPLETE RECORDS 14.47

Liabilities ` Assets `
Sri Srinivas’s capital 1,00,000 Furniture 10,000
Liabilities for goods 20,500 Stock 70,000
Rent 1,000 Debtors 25,000
Cash at bank 14,500
Cash in hand 2,000
1,21,500 1,21,500
You are furnished with the following information:
(1) Sri Srinivas sells his goods at a profit of 20% on sales.
(2) Goods are sold for cash and credit. Credit customers pay by cheques only.
(3) Payments for purchases are always made by cheques.
(4) It is the practice of Sri Srinivas to send to the bank every weekend the
collections of the week after paying every week, salary of ` 300 to the clerk,
Sundry expenses of ` 50 and personal expenses ` 100.
Analysis of the Bank Pass–Book for the 13 weeks period ending 31st March, 2016
disclosed the following:

`
Payments to creditors 75,000
Payments of rent upto 31.3.2016 4,000
Amounts deposited into the bank 1,25,000
(include ` 30,000 received from debtors by cheques)
The following are the balances on 31st March, 2016: `
Stock 40,000
Debtors 30,000
Creditors for goods 36,500

On the evening of 31st March, 2016 the Cashier absconded with the available
cash in the cash box. There was no cash deposit in the week ended on that date.
You are required to prepare a statement showing the amount of cash defalcated
by the Cashier and also a Profit and Loss Account for the period ended 31st
March, 2016 and a Balance Sheet as on that date.

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 14.48 ACCOUNTING

Question 3
Mr. A runs a business of readymade garments. He closes the books of accounts
on 31st March. The Balance Sheet as on 31st March, 2016 was as follows:
Liabilities ` Assets `
A’s capital a/c 4,04,000 Furniture 40,000
Creditors 82,000 Stock 2,80,000
Debtors 1,00,000
Cash in hand 28,000
Cash at bank 38,000
4,86,000 4,86,000
You are furnished with the following information:
(1) His sales, for the year ended 31st March, 2017 were 20% higher than the
sales of previous year, out of which 20% sales was cash sales.
Total sales during the year 2015-16 were ` 5,00,000.
(2) Payments for all the purchases were made by cheques only.
(3) Goods were sold for cash and credit both. Credit customers pay be cheques
only.
(4) Deprecation on furniture is to be charged 10% p.a.
(5) Mr. A sent to the bank the collection of the month at the last date of the
each month after paying salary of ` 2,000 to the clerk, office expenses
` 1,200 and personal expenses ` 500.
Analysis of bank pass book for the year ending 31st March 2017disclosed the
following:
`
Payment to creditors 3,00,000
Payment of rent up to 31 March, 2017
st
16,000
Cash deposited into the bank during the year 80,000
The following are the balances on 31st March, 2017:
`
Stock 1,60,000
Debtors 1,20,000
Creditors for goods 1,46,000

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 ACCOUNTS FROM INCOMPLETE RECORDS 14.49

On the evening of 31st March 2017, the cashier absconded with the available cash in
the cash book.
You are required to prepare Trading and Profit and Loss A/c for the year ended
31st March, 2017 and Balance Sheet as on that date. All the workings should form
part of the answer.
Question 4
A trader keeps his books of account under single entry system. On 31st March,
2015 his statement of affairs stood as follows :
Liabilities ` Assets `
Trade Creditors 5,80,000 Furniture, Fixtures and Fittings 1,00,000
Bills Payable 1,25,000 Stock 6,10,000
Outstanding Expenses 45,000 Trade Debtors 1,48,000
Capital Account 2,50,000 Bills Receivable 60,000
Unexpired Insurance 2,000
Cash in Hand and at Bank 80,000
10,00,000 10,00,000
The following was the summary of Cash–book for the year ended 31st March,
2016:
Receipts ` Payments `
Cash in Hand and at Bank on Payments to Trade 75,07,000
Creditors
1st April, 2016 80,000 Payments for Bills 8,15,000
payable
Cash Sales 73,80,000 Sundry Expenses paid 6,20,700
Receipts from Trade Debtors 15,10,000 Drawings 2,40,000
Receipts for Bills Receivable 3,40,000 Cash in Hand and at
Bank
on 31st March, 2016 1,27,300
93,10,000 93,10,000
Discount allowed to trade debtors and received from trade creditors amounted to
` 36,000 and ` 28,000 respectively. Bills endorsed amounted to ` 15,000. Annual
Fire Insurance premium of ` 6,000 was paid every year on 1st August for the
renewal of the policy. Furniture, fixtures and fittings were subject to depreciation
@ 15% per annum on diminishing balances method.

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 14.50 ACCOUNTING

You are also informed about the following balances as on 31st March, 2016 :
`
Stock 6,50,000
Trade Debtors 1,52,000
Bills Receivable 75,000
Bills Payable 1,40,000
Outstanding Expenses 5,000
The trader maintains a steady gross profit ratio of 10% on sales.
Prepare Trading and Profit and Loss Account for the year ended 31st March, 2016
and Balance Sheet as at that date.
Question 5
The following is the Balance Sheet of a concern on 31st March, 2015 :
` `
Capital 10,00,000 Fixed Assets 4,00,000
Creditors (Trade) 1,40,000 Stock 3,00,000
Profit & Loss A/c 60,000 Debtors 1,50,000
Cash & Bank 3,50,000
12,00,000 12,00,000
The management estimates the purchases and sales for the year ended 31st
March, 2016 as under :

upto 28.2.2016 March 2016

` `
Purchases 14,10,000 1,10,000
Sales 19,20,000 2,00,000
It was decided to invest ` 1,00,000 in purchases of fixed assets, which are
depreciated @ 10% on cost.
The time lag for payment to Trade Creditors for purchase and receipt from Sales
is one month. The business earns a gross profit of 30% on turnover. The expenses
against gross profit amount to 10% of the turnover. The amount of depreciation
is not included in these expenses.

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 ACCOUNTS FROM INCOMPLETE RECORDS 14.51

Draft a Balance Sheet as at 31st March, 2016 assuming that creditors are all Trade
Creditors for purchases and debtors for sales and there is no other item of current
assets and liabilities apart from stock and cash and bank balances. Assume that all
sales and purchases are on credit basis.

ANSWERS/ SOLUTIONS
MCQs
1. (b) 2. (a) 3. (b) 4. (a) 5. (b)
Theoretical Questions
1. Single entry system is an inaccurate and unsystematic method of recording
business transactions. The procedures adopted are: Pure single entry;
Simple entry and Queasy single entry. For details, Refer Para 1 and 2 of the
chapter.
Practical Questions
Answer 1
Calculation of Credit Sales and Total sales
12 months
Credit Sales for the year ended 2015-16 = Debtors x
1.5 months
12 months
= `1,25,000 x
1.5 months
= ` 10,00,000
100%
Total sales for the year ended 2015-16 = Credit sales x
80%
100%
= ` 10,00,000 x
80%
= ` 12,50,000
Answer 2
Statement showing the amount of cash defalcated by the Cashier
` `
Cash balance as on 1.1.2016 2,000
Add : Cash sales (W.N.2 and W.N.4) 1,16,250 1,18,250
Less : Salary to clerk (` 300 × 13) 3,900

© The Institute of Chartered Accountants of India

 14.52 ACCOUNTING

Sundry expenses (` 50 × 13) 650

Drawings of Sri Srinivas (` 100 × 13) 1,300
Deposit into bank (` 1,25,000 – ` 30,000) 95,000 (1,00,850)
Cash balance as on 31.3.2016 (defalcated by cashier) 17,400
Trading and Profit and Loss Account of Sri Srinivas
for the 13 week period ended 31st March, 2016
` ` `
To Opening stock 70,000 By Sales :
To Purchases 91,000 Cash (W.N.2 1,16,250
and W.N.4)
To Gross Profit c/d 30,250 Credit (W.N.3) 35,000 1,51,250
By Closing stock 40,000
191,250 1,91,250
To Salaries (300 x 13) 3,900 By Gross profit b/d 30,250
To Rent (` 4,000 – ` 3,000
1,000)
To Sundry Expenses (50 650
x 13)
To Loss of cash by theft 17,400
To Net Profit (b.f.) 5,300
30,250 30,250
Balance Sheet of Sri Srinivas
as on 31st March, 2016

Liabilities ` Assets `
Capital as on 1.1.2016 1,00,000 Furniture 10,000
Add : Profit 5,300 Stock 40,000
1,05,300 Debtors 30,000
Less : Drawings (1,300) 1,04,000 Cash at bank 60,500
Liabilities for goods 36,500
1,40,500 1,40,500

© The Institute of Chartered Accountants of India

 ACCOUNTS FROM INCOMPLETE RECORDS 14.53

Working Notes :
(1) Purchases
Creditors Account
` `
To Bank A/c 75,000 By Balance b/d 20,500
To Balance c/d 36,500 By Purchases A/c (Bal. fig.) 91,000
1,11,500 1,11,500
(2) Total sales
`
Opening stock 70,000
Add : Purchases 91,000
1,61,000
Less : Closing stock (40,000)
Cost of goods sold 1,21,000
Add : Gross profit @ 25% on cost 30,250
Total Sales 1,51,250
(3) Credit Sales
Debtors Account
` `
To Balance b/d 25,000 By Bank A/c 30,000
To Sales A/c (Bal. fig.) 35,000 By Balance c/d 30,000
60,000 60,000

(4) Cash Sales

`
Total sales 1,51,250
Less : Credit Sales (35,000)
Cash sales 1,16,250

© The Institute of Chartered Accountants of India

 14.54 ACCOUNTING

(5) Bank balance as on 31.3.2016

` `
To Balance b/d 14,500 By Creditors A/c 75,000
To Debtors A/c 30,000 By Rent A/c 4,000
To Cash A/c (1,25,000 – 30,000) 95,000 By Balance c/d (b.f.) 60,500
1,39,500 1,39,500
Notes :
1. All purchases are taken on credit basis.
2. In the absence of information about the rate of depreciation, no
depreciation has been charged on furniture.
3. The amount defalcated by the cashier may be treated as recoverable from
him. In that case, ` 17,400 may be shown as sundry advances on assets side
in the Balance Sheet and net profit for the 13 week period ending 31st
March, 2016 would amount ` 22,700.
Answer 3
Trading and Profit and Loss Account for the year ending 31st March 2017
Particulars ` Particulars `
To Opening stock 2,80,000 By Sales (W.N. 3)
To Purchases (W.N. 1) 3,64,000 Credit 4,80,000
To Gross profit (b.f.) 1,16,000 Cash 1,20,000 6,00,000
By Closing stock 1,60,000
7,60,000 7,60,000
To Salary (2,000 x 12) 24,000 By Gross profit 1,16,000
To Rent 16,000
To Office expenses 14,400
(1,200 x 12)
To Loss of cash (W.N. 6) 23,600
To Depreciation on 4,000
furniture
To Net Profit (b.f.) 34,000
1,16,000 1,16,000

© The Institute of Chartered Accountants of India

 ACCOUNTS FROM INCOMPLETE RECORDS 14.55

Balance Sheet as on 31st March, 2017

Liabilities ` Assets `
A’s Capital 4,04,000 Furniture 40,000
Add: Net Profit 34,000 Less: Depreciation (4,000) 36,000
Less: Drawings Stock 1,60,000
(500 x 12) (6,000) 4,32,000
Creditors 1,46,000 Debtors 1,20,000
Cash at bank 2,62,000
5,78,000 5,78,000

Working Notes:
(1) Calculation of purchases
Creditors Account
Particulars ` Particulars `
To Bank A/c 3,00,000 By Balance b/d 82,000
To Balance c/d 1,46,000 By Purchases (Bal. fig.) 3,64,000
4,46,000 4,46,000

(2) Calculation of total sales

`
Sales for the year 2015-16 5,00,000
Add: 20% increase 1,00,000
Total sales for the year 2016-17 6,00,000

(3) Calculation of credit sales

`
Total sales 6,00,000
Less: Cash sales (20% of total sales) (1,20,000)
4,80,000

© The Institute of Chartered Accountants of India

 14.56 ACCOUNTING

(4) Calculation of cash collected from debtors

Debtors Account

Particulars ` Particulars `
To Balance b/d 1,00,000 By Bank A/c (Bal. fig.) 4,60,000
To Sales A/c 4,80,000 By Balance c/d 1,20,000
5,80,000 5,80,000

(5) Calculation of closing balance of cash at bank

Bank Account

Particulars ` Particulars `
To Balance b/d 38,000 By Creditors A/c 3,00,000
To Debtors A/c 4,60,000 By Rent A/c 16,000
To Cash A/c 80,000 By Balance c/d (b.f.) 2,62,000
5,78,000 5,78,000

(6) Calculation of the amount of cash defalcated by the cashier

`
Cash balance as on 1st April 2016 28,000
Add: Cash sales during the year 1,20,000
1,48,000
Less: Salary (`2,000x12) 24,000
Office expenses (`1,200 x 12) 14,400
Drawings of A (`500x12) 6,000
Cash deposited into bank during the year 80,000 (1,24,400)
Cash balance as on 31st March 2017(defalcated by the 23,600
cashier)

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 ACCOUNTS FROM INCOMPLETE RECORDS 14.57

Answer 4
Trading and Profit and Loss Account
for the year ended 31st March, 2016
` `
To Opening Stock 6,10,000 By Sales
To Purchases (W.N. 3) 84,10,000 Cash 73,80,000
To Gross profit c/d 9,30,000 Credit (W.N. 2) 19,20,000 93,00,000
(10% of 93,00,000) By Closing stock 6,50,000
99,50,000 99,50,000
To Sundry expenses 5,80,700 By Gross profit 9,30,000
(W.N. 6) b/d
To Discount allowed 36,000 By Discount 28,000
received
To Depreciation 15,000
(15% ` 1,00,000)
To Net Profit (b.f.) 3,26,300
9,58,000 9,58,000

Balance Sheet as at 31st March, 2016

Liabilities Amount Assets Amount
` `
Capital Furniture & 1,00,000
Fittings
Opening balance 2,50,000 Less : (15,000) 85,000
Depreciation
Less : Drawing (2,40,000) Stock 6,50,000
10,000 Trade Debtors 1,52,000
Add : Net profit 3,26,300 3,36,300 Bills receivable 75,000
for the years
Bills payable 1,40,000 Unexpired insurance 2,000
Trade creditors 6,10,000 Cash in hand & at bank 1,27,300
Outstanding 5,000
expenses
10,91,300 10,91,300

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 14.58 ACCOUNTING

Working Notes :
1. Bills Receivable Account

` `
To Balance b/d 60,000 By Cash 3,40,000
To Trade debtors (b.f.) 3,70,000 By Trade creditors (Bills 15,000
endorsed)
By Balance c/d 75,000
4,30,000 4,30,000

2. Trade Debtors Account

` `
To Balance b/d 1,48,000 By Cash/Bank 15,10,000
To Credit sales 19,20,000 By Discount allowed 36,000
(Bal. fig.) By Bills receivable 3,70,000
By Balance c/d 1,52,000
20,68,000 20,68,000
3. Memorandum Trading Account

` `
To Opening stock 6,10,000 By Sales 93,00,000
To Purchases (Balancing 84,10,000 By Closing stock 6,50,000
figure)
To Gross Profit (10% on sales) 9,30,000
99,50,000 99,50,000

4. Bills Payable Account

` `
To Cash/Bank 8,15,000 By Balance b/d 1,25,000
To Balance c/d 1,40,000 By Creditors (balancing 8,30,000
figure)
9,55,000 9,55,000

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 ACCOUNTS FROM INCOMPLETE RECORDS 14.59

5. Trade Creditors Account

` `
To Cash/Bank 75,07,000 By Balance b/d 5,80,000
To Discount received 28,000 By Purchases (as calculated 84,10,000
To Bills receivable 15,000 in W.N. 3)
To Bills payable 8,30,000
To Balance c/d
(balancing figure) 6,10,000
89,90,000 89,90,000
6. Computation of sundry expenses to be charged to Profit & Loss A/c

`
Sundry expenses paid (as per cash book) 6,20,700
Add : Prepaid expenses as on 31–3–2015 2,000
6,22,700
Less : Outstanding expenses as on 31–3–2015 (45,000)
5,77,700
Add : Outstanding expenses as on 31–3–2016 5,000
5,82,700
Less : Prepaid expenses as on 31–3–2016 (Insurance paid till July, (2,000)
2016) (6,000 x 4/12)
5,80,700

Answer 5
Projected Balance Sheet of ......
as on 31st March, 2016
` `
Capital 10,00,000 Fixed Assets 4,00,000
Profit & Loss Account Additions 1,00,000
as on 1st April, 2015 60,000 5,00,000
Add : Profit for the Less : Depreciation
year 3,74,000 4,34,000 @ 10% (50,000) 4,50,000

© The Institute of Chartered Accountants of India

 14.60 ACCOUNTING

Creditors (Trade) 1,10,000 Stock in trade 3,36,000

Sundry Debtors 2,00,000
Cash & Bank Balances 5,58,000
(working note)
15,44,000 15,44,00
0
Working Notes:
1. Projected Trading and Profit and Loss Account for the year ended 31st
March, 2016
` `
To Opening Stock 3,00,000 By Sales 21,20,000
To Purchases 15,20,000 By Closing Stock (balancing 3,36,000
figure)
To Gross Profit c/d (30% 6,36,000
on sales)
24,56,000 24,56,000
To Sundry Expenses (10% 2,12,000 By Gross Profit b/d 6,36,000
on
sales)
To Depreciation 50,000
To Net Profit (b.f.) 3,74,000
6,36,000 6,36,000
Cash and Bank Account
1st April, 2015 to 31st March, 2016
` `
To Balance b/d 3,50,000 By Sundry Creditors 15,50,000
To Sundry Debtors 20,70,000 (` 1,40,000+` 14,10,000)
(` 1,50,000+` 19,20,000) By Expenses 2,12,000
By Fixed Assets 1,00,000
By Balance c/d (b.f.) 5,58,000
24,20,000 24,20,000

© The Institute of Chartered Accountants of India