Accounts from Incomplete Records - Single Entry System

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 Meaning

Accounting records that are not maintained according to the Double Entry System are known as Accounts from Incomplete Records or Single Entry System of Accounting. It is an incomplete double entry system varying with circumstances.

Key Points:
·   Incomplete Records: It is a system of recording business transactions. In some of the transactions, both aspects are recorded; while in other on aspect is recorded or it is not recorded at all.
·  Statements of Affairs: It is a statement of Assets and Liabilities. The difference between the two sides represents the proprietor’s (owner) capital.
·   Capital: Amount invested by the owner.
·   Drawings: Money or goods taken by the proprietor from the business for his/her personal use.

Ascertaining Profit under the Single Entry System:

1.       Statements of Affairs Method

2.       Conversion method

Net Worth Method or Statement of Affairs Method

A Statements of Affairs is a statement of assets and liabilities. Difference between the amounts of the two sides is taken as capital method. Under the Single Entry System, it is necessary to prepare Statements of Affairs at the end of the year and also in the beginning of the year, if not already prepared to determine profit. However, following two adjustments must be borne in mind for determining profit:

·         Adjustment for Capital Introduced: If the proprietor bought in additional capital during the year, it should be deducted from the capital at the end (since this increase is not due to profit but fresh introduction of capital).

·         Adjustments for drawings: Drawings by the proprietor should be added to the capital at the end and had the drawings not been made, the capital at the close of the year would have been higher.

Formula for determining the profit is as follows:

Profit = Capital at the end + Drawings – Additional Capital Introduced – Capital in the beginning.   

The above formula may be shown as follows in the form of Statement of Profit or Loss:

                          Statement of Profit or Loss

                                        For the year ended…

Particulars	Amount (Rs.)
Capital at the end Add: Drawings during the year Less: Additional Capital Introduced during the year Adjusted capital at the end Less: Capital in the beginning Profit or Loss for the year	xxx xxx
	xxx xxx
	xxx xxx
	xxx

Example1: Akansha maintains books on Single Entry System. She gives you the following information:

Capital on 1^st April, 2018      Rs. 30,400

Capital on 1^st April, 2019      Rs. 33,800                           

Drawings made during the period: April, 2018 to March,2019 Rs. 9,600

Capital introduced on 1^st August,2018  Rs. 4,000

You are required to calculate the profit or loss made by Akansha.

                    Statement of Profit or Loss

                      For the year ended 31^st March,2019

Particulars	Amount (Rs.)
Capital as on 1st April, 2019 Add: Drawings during the year: April,2018 to March,2019 Less: Capital Introduced on 1st August,2018 Adjusted capital on 1st April,2019 Less: Capital on 1st April,2018 Profit made during the year	33,800 9,600
	43,400 4,000
	39,400 30,400
	9,000

Example2: Calculate the amount of profit or loss of Mr. X:

Particulars	Amount (Rs.) 1st Jan,2018	Amount (Rs.) 31st Dec,2018
Cash Bank Furniture Creditor Outstanding Expenses  Stock	10,000 5,000 50,000 10,000 5,000 13,000	25,000 30,000 7,000 13,000 7,000 52,000

Drawings for the year was Rs.40,000.

Solution:

                  Statement of Profit or Loss

               For the year ended 31^st Dec, 2018

Particulars	Amount (Rs.)
Closing capital Opening capital Drawings	94,000 (63,000) 40,000
Net Profit	71,000

Working notes:

             Statement of Affairs as at 31^st Dec, 2018

Liabilities	Amount (Rs.)	Assets	Amount (Rs.)
Capital (b/f) Creditor Outstanding expenses	94,000 13,000 7,000	Cash Bank Furniture Stock	25,000 30,000 7,000 52,000
	1,14,000		1,14,000

                    Balance Sheet as on 31^st Dec, 2018

Liabilities	Amount (Rs.)	Assets	Amount (Rs.)
Capital (b/f) Creditor	63,000 10,000	Cash Bank Furniture Stock	10,000 5,000 50,000 13,000
	73,000		73,000