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Preparation of Final Accounts From Incomplete Records or Single Entry System:

Gayatri D.
02/08/2021 0 0

Preparation of Final Accounts From Incomplete Records or Single Entry System:

There are two methods for the preparation of final accounts from single entry books/ incomplete records.

Method 1: Under this system, two statements are prepared:

  1. Statement of profit and loss and
  2. Statement of affairs.

Step1 - Prepare a statement of affairs at the beginning and at the year-end to find out the opening and closing capital, respectively.

Proforma of the statement of affairs:

Statement of affairs as on....(date).

Liabilities Amount (Rupees) Assets Amount (Rupees)
Capital (Bal.fig.) --- Building  ---
Loans, Bank Overdraft --- Machinery ---
Sundry Creditors --- Furniture ---
Bills Payable --- Inventory ---
Outstanding Expenses --- Sundry Debtors ---
    Bills receivable ---
    Loans and advances ---
    Cash and Bank ---
    Prepaid Expenses ---
  ----   ----

Sources to find out details like assets and liabilities of a business enterprise:

  1. Cash Book for cash balance
  2. Bank Passbook for the bank balance
  3. Personal Ledger for Debtors, Creditors, Bills receivable and other current assets/ liabilities etc.
  4. Inventory by actual counting and Valuation
  5. Written down value of Fixed assets from the list prepared by the proprietor disclosing the original cost, the date of purchase and written down value after deducting a reasonable amount of deprecation.

Step2 - Prepare a statement of profit and loss to ascertain the trading profit. It can be prepared either in the statement form or in the form of a ledger. Both the formats are explained below.

Format: Statement of Profit and Loss for the year ended.

  1. In the statement form
Particulars Amount Amount
Capital at the end (a) ---  
   Add : Drawings ---  
   Less: Fresh Capital Introduced ---  
Capital at the beginning (b) ---  
PROFIT /LOSS (a-b)   ----
Less : Adjustments, if any say, Bad debts, Depreciation etc ---  
Net Profit/Loss for the period   ---

    Less : Appropriation items:

  1. Interest on partner’s capital
  2. Partners’ salaries etc.

 

---

---

 

Divisible Profit

  ----

 

 2. In the form of Ledger

Particulars Amount (Rupees) Particulars Amount (Rupees)
    By Balance b/d ---
To Drawings --- By Additional Capital ---
   
By Interest on partner’s capital
---
    By Partners’ salaries ---
To Net Loss (Bal.fig.) --- By Net Profit (Bal.fig.) ---
To Balance c/d ---    
  ----   ----

 

Step3 - Prepare a statement of affairs as at the YEAR-END to show the business’s financial position.

Method 2: Conversion of single entry to double entry

Step1 - various ledger accounts are prepared, e.g. sales, purchases, debtors, creditors, Trading A/c, cash book to locate missing details.

Step2 - Find all the required details from the available information. For example, if we know opening & closing balances in Debtors’ A/c and the cash received from debtors, the balancing figure will indicate sales figures. Similarly, with the opening and closing balances of creditors & credit purchases figures, we can find cash paid to creditors from the creditor’s ledger.

Step3 - Once all these figures required to prepare financial statements are calculated through their respective ledgers, it is easy to prepare the financial statements in regular formats.

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