0Preparation 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:
- Statement of profit and loss and
- 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:
- Cash Book for cash balance
- Bank Passbook for the bank balance
- Personal Ledger for Debtors, Creditors, Bills receivable and other current assets/ liabilities etc.
- Inventory by actual counting and Valuation
- 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.
- 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:
|
--- --- | |
| 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.
