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Single Entry System | Statement of Affairs with Adjustments

Arjun EP

Published on: May 30, 2021

Statement of Affairs with Adjustment

Under this topic, we should find out opening capital, closing capital and profit or loss for the period.

Step 1: Find out opening capital or prepares opening statement of affairs (never adjust here, additional information),

Step 2: Prepare closing statement of affairs to find out closing capital (adjustments can be adjusted here),

Step 3: Prepare statement of P&L to find out profit or loss for the year (adjustment can be adjusted here).

Note: In this eBook, entire related additional information are adjusted with closing statement of affairs.

(A) Opening Statement of Affairs | Opening Capital | Beginning Capital

The opening statement of affairs is prepared to find-out opening capital.

Statement of affairs is similar to balance sheet.

All the assets are recorded on right hand side.

All the liabilities are recorded on left hand side.

The difference between assets and liabilities is opening capital.

(B) Closing Statement of Affairs | Closing Capital | Ending Capital

The closing statement of affairs is prepared to find-out closing capital.

Statement of affairs is similar to balance sheet.

All the assets are recorded on right hand side.

All the liabilities are recorded on left hand side.

If there is any adjustment, it should be adjusted with closing statement of affairs.

The difference between assets and liabilities is closing capital.

(C) Statement of Profit and Loss | Net Profit or Net Loss

After preparation of opening statement of affairs and closing statement of affairs, statement of profit and loss is prepared.

Before preparing statement of profit and loss, following points should be found-out:

Determination of drawing made by the owner during the year,

Additional or further capital invested by the owner,

Interest on capital (if any)

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country

PROBLEM: 2A

AK Traders keeps its accounts under single entry system. The following summary of assets and liabilities are given on 31^st December 2020:

Trade creditors	$350,000	Furniture	$20,000
Sundry debtors	300,000	Prepaid insurance	5,000
Stock in trade	250,000	Cash balance	50,000

Additional information:

(a) The trader started business on 1st January 2020 with capital of $250,000.

(b) Business owner withdrew $3,000 per month.

(d) Depreciate furniture by 10%.

Required: (i) Closing statement of affairs to find out closing capital;

(ii) Amount of profit earned by a trader during the year.

[Answer: Closing capital = $267,000; Profit for the year = $53,000]

SOLUTION:

Statement of Affairs

On 31^st December 2020

Liabilities	Amount $	Assets		Amount $
Trade creditors	3,50,000	Sundry debtors	3,00,000
Closing capital (b/f)	2,67,000	Less: Bad debts	(6,000)	2,94,000
		Stock in trade		2,50,000
		Furniture	20,000
		Less: Depn 10%	(2,000)	18,000
		Prepaid insurance		5,000
		Cash balance		50,000
	6,17,000			6,17,000

Statement of Profit and Loss

Particulars		Amount $
Closing capital		2,67,000
Add: Drawings ($3,000 x 12)		36,000
Less: Additional capital		Nil
Less: Opening capital		(250,000)
Profit for the year		53,000

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Click on link for YouTube videos:
Accounting Equation	http://tiny.cc/c89jkz
Basic Journal Entries in Nepali	http://tiny.cc/uaakkz
Basic Journal Entries	http://tiny.cc/8aakkz
Journal Entry and Ledger	http://tiny.cc/caakkz
Ledger	http://tiny.cc/haakkz
Subsidiary Book	http://tiny.cc/399jkz
Cash Book	http://tiny.cc/889jkz
Trial Balance & Adjusted Trial Balance	http://tiny.cc/c59jkz
Bank Reconciliation Statement (BRS)	http://tiny.cc/q59jkz
Depreciation	http://tiny.cc/ugakkz
Final Accounts: Class 11	http://tiny.cc/y89jkz
Adjustment in Final Accounts	http://tiny.cc/keakkz
Capital and Revenue	http://tiny.cc/peakkz
Single Entry System	http://tiny.cc/n19jkz
Non-Trading Concern	http://tiny.cc/j09jkz
Government Accounting	http://tiny.cc/hcakkz
Goswara Voucher (Journal Voucher)	http://tiny.cc/hcakkz

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Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country

PROBLEM: 2B

Manju started a business with cash $200,000 and stock in trade of $50,000. Her position on 31^st December 2020 was:

Transactions	Amount $
Stock at the end	2,00,000	Machinery (1 April)	30,000
Sundry debtors	1,50,000	Cash at bank	80,000
Sundry creditors	2,00,000

Additional information:

(a) She withdrew $4,000 per month for domestic purpose.

(b) Provide depreciation on machinery 10% p.a.

Required: (i) Closing statement of affairs to find out closing capital.

(ii) Amount of profit or loss during the year.

[Answer: Closing capital = $1,10,000; Profit for the year = $30,000;

*Opening capital (2,00,000 + 50,000) = $2,50,000]

SOLUTION:

Statement of Affairs

On 31^st December 2020

Liabilities	Amount $	Assets		Amount $
Sundry creditors	2,00,000	Stock at the end		2,00,000
Closing capital (b/f)	2,57,750	Sundry debtors		1,50,000
		Machinery	30,000
		Less: Depn (10%, 9m)	(2,250)	27,750
		Cash at bank		80,000
	4,57,750			4,57,750

Statement of Profit and Loss

Particulars		Amount $
Closing capital		2,57,750
Add: Drawings ($4,000 x 12)		48,000
Less: Additional or further capital		Nil
Less: Interest on capital		(25,000)
Less: Opening capital		(200,000)
Profit for the year		80,750

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country

PROBLEM: 2C

A trader who keeps his books of accounts under single entry system has following information:

Extracted Balance of Ledgers on 31^st December 2020

Account receivable	$1,50,000	Cash and bank	$1,40,000
Stock in trade	1,30,000	Furniture	30,000
Accounts payable	90,000	Loan from friends	1,00,000
Equipment	60,000	Prepaid rent	25,000
Motorbike	1,80,000

Additional information:

(a) Business started with cash of $50,000, bank balance of $1,50,000 and trading goods $50,000.

(b) Monthly drawing was $5,000 per month for twelve month.

(d) Depreciate fixed assets by 15%.

Required: (i) Closing statement of affairs to find out closing capital; (ii) Profit and loss statement

[Answer: Closing capital = $4,84,500; Profit for the year = $269,500;

*Opening capital (50,000 + 150,000 + 50,000) = $250,000]

SOLUTION:

Statement of Affairs

On 31^st December 2020

Liabilities	Amount $	Assets		Amount $
Accounts payable	90,000	Account receivable		1,50,000
Loan from friend	1,00,000	Stock in trade		1,30,000
Closing capital (b/f)	4,84,500	Equipment	60,000
		Less: Depn 15%	(9,000)	51,000
		Motorbike	1,80,000
		Less: Depn 15%	(27,500)	1,53,000
		Cash and bank		1,40,000
		Furniture	30,000
		Less: Depn 15%	(4,500)	25,500
		Prepaid rent		25,000
	6,74,500			6,74,500

Statement of Profit and Loss

Particulars		Amount $
Closing capital		4,84,500
Add: Drawings ($5,000 x 12)		60,000
Less: Additional or further capital		(50,000)
Less: Interest on capital		Nil
Less: Opening capital		(225,000)
Profit for the year		2,69,500

Opening capital = cash $50,000 + bank $1,50,000 + stock $50,000 = $2,50,000

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country

PROBLEM: 2D

A trader, who keeps his books of account on single entry system, provided you following assets and liabilities on 31^st March 2020:

Cash and bank	$50,000	Machinery	$2,00,000
Sundry creditors	80,000	Closing stock	3,00,000
Sundry debtors	1,20,000	Bills payable	2,00,000
Prepaid rent	25,000	10% Investment (1 July)	1,50,000

Additional information:

The trader started business on 1st April 2019 with capital of $2,50,000.

His quarterly drawings were $18,250 but additional capital was $1,50,000.

Depreciation is charged 10% p.a. on machinery.

Bad debts written off $10,000 and 5% for doubtful debts on sundry debtors.

Required: (a) Closing statement of affairs to determine closing capital; (b) Statement of profit and loss

[Answer: Closing capital = $5,47,000; Profit for the year = $2,20,000;

*Accrued interest (1,50,000 x 10% x 6/12) = $7,500]

SOLUTION:

Statement of Affairs

On 31^st March 2021

Liabilities	Amount $	Assets		Amount $
Sundry creditors	80,000	Cash and bank		50,000
Bills payable	2,00,000	Debtors	1,20,000
Closing capital (b/f)	5,47,000	Less: Bad debts	(10,000)
			1,10,000
		Less: PBD 5%	(5,500)	1,04,500
		Prepaid rent		25,000
		Machinery	2,00,000
		Less: Depn 10%	(20,000)	1,90,000
		Closing stock		3,00,000
		10% Investment	1,50,000
		Add: Accrued interest	+ 7,500	1,57,500
	8,27,000			8,27,000

Statement of Profit and Loss

Particulars		Amount
Closing capital		5,47,000
Add: Drawings ($18,250 x 4)		73,000
Less: Additional or further capital		(150,000)
Less: Interest on capital		Nil
Less: Opening capital		(250,000)
Profit for the year		2,20,000

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Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country

PROBLEM: 2E

Mr Kamal maintains his books under single entry system. He has following information:

Particulars	1^st Jan 2020	31^st Dec 2020
Furniture	$20,000	$20,000
Stock	2,80,000	3,50,000
Sundry debtors	1,50,000	2,40,000
Cash	15,000	50,000
Sundry creditors	1,75,000	1,50,000
15% Loan (1 May)	–	1,00,000
Investment	–	40,000

Additional information:

(i) He introduced further capital of $50,000 and his drawings during the year were $90,000.

(ii) Provide a reserve for bad and doubtful debt at 5%.

(iii) Depreciate furniture by 10%.

Required: (a) Statement of affairs to find out opening and closing capital; (b) Statement of profit and loss

[Answer: Opening capital = $290,000;

Closing capital = $401,000; Profit for the year = $151,000]

SOLUTION:

Statement of Affairs

On 1^st January 2020

Liabilities	Amount $	Assets	Amount $
Sundry creditors	1,75,000	Furniture	20,000
Opening capital (b/f)	2,90,000	Stock	2,80,000
		Sundry debtors	1,50,000
		Cash	15,000
	4,65,000		4,65,000

Statement of Affairs

On 31^st December 2020

Liabilities		Amount $	Assets		Amount $
Sundry creditors		1,75,000	Furniture	20,000
15% Loan	100,000		Less: Depn 10%	(2,000)	18,000
Add: O/s interest (10m)	+ 10,000	1,10,000	Stock		3,50,000
Closing capital (b/f)		4,01,000	Sundry debtors	240,000
			Less: PBD 5%	(12,000)	2,28,000
			Cash		50,000
			Investment		40,000
		6,86,000			6,86,000

Statement of Profit and Loss

Particulars		Amount $
Closing capital		4,01,000
Add: Drawings		90,000
Less: Additional or further capital		(50,000)
Less: Interest on capital		Nil
Less: Opening capital		(290,000)
Profit for the year		1,51,000

Interest on loan = 100,000 @ 15% x 8/12 = $10,000

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country

PROBLEM: 2F

Ms Eliza maintains her books of account on single entry system. She submitted the following details:

Particulars	1^st Jan 2020	31^st Dec 2020
Cash	$50,000	$70,000
Furniture	30,000	30,000
Stock	3,60,000	4,50,000
Debtors	60,000	1,20,000
Creditors	80,000	75,000
Bank (overdraft)	10,000	(50,000)

Additional information:

(i) She introduced further capital of $120,000

(ii) Her drawings half yearly was $50,000.

(iii) Depreciate furniture by 20% p.a.

(iii) Reserve for bad and doubtful debts at 5% on debtors.

Required: (a) statement of affairs to determine opening and closing capital; (b) Statement of profit and loss

[Answer: Opening capital = $430,000]

Closing capital = $533,000; Profit for the year = $83,000]

SOLUTION:

Statement of Affairs

On 1^st January 2020

Liabilities	Amount $	Assets	Amount $
Creditors	80,000	Cash	50,000
Opening capital (b/f)	4,30,000	Furniture	30,000
		Stock	3,60,000
		Debtors	60,000
		Bank balance	10,000
	5,10,000		5,10,000

Statement of Affairs

On 31^st December 2020

Liabilities	Amount $	Assets		Amount $
Creditors	75,000	Cash		70,000
Bank overdraft	50,000	Furniture	30,000
Closing capital (b/f)	5,33,000	Less: Depn 20%	(6,000)	24,000
		Stock		4,50,000
		Debtors	120,000
		Less: PBD 5%	(6,000)	1,14,000
	6,58,000			6,58,000

Statement of Profit and Loss

Particulars		Amount $
Closing capital		5,33,000
Add: Drawings ($50,000 x 2)		1,00,000
Less: Additional or further capital		(1,20,000)
Less: Interest on capital		NIL
Less: Opening capital		(4,30,000)
Profit for the year		83,000

#####

PROBLEMS AND ANSWERS OF SINGLE ENTRY SYSTEM

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country

PROBLEM: 2A

AR Traders who keeps his books of accounts under single entry system provided you the following summary of assets and liabilities of its business on 31^st December 2020:

Trade creditors	$35,000	Furniture	$20,000
Sundry debtors	30,000	Prepaid insurance	5,000
Stock in trade	30,000	Cash balance	20,000

Additional information:

The trader started business on 1^st January 2020 with capital of $50,000.

His estimated drawing during the year amounted to $6,800.

Write off bad debts of $600. Depreciate furniture by 10%.

Required: (a) Closing statement of affairs to find out closing capital;

(b) Amount of profit earned by a trader during the year.

[Answer: Closing capital = $67,400 or $70,000;

Profit for the year = $24,200]

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country

PROBLEM: 2B

Mariam keeps her books of accounts under single entry system supplied to you the following summary of assets and liabilities of his business for 31^st December 2020:

	Amount $		Amount $
Account receivable	55,000	Cash at bank	40,000
Stock trade	30,000	Furniture	20,000
Account payable	60,000	Loan from friends	10,000
Equipment	80,000	Advance rent	5,000

Other information:

The capital at the start of the business consisted cash of $10,000, bank balance of $50,000 and trading goods $20,000.

Her monthly drawing was $600.

Depreciate equipment by $6,000

Advance rent expired to the extent of $2,000.

Required: (a) Closing statement of affairs to find out closing capital; (b) Profit and loss statement

[Answer: Closing capital = $152,000 or $1,60,000;

Profit for the year = $79,200;

*Opening capital (10,000 + 50,000 + 20,000) = $80,000]

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country

PROBLEM: 2C

Munabbar started a business with cash $40,400 and building $50,000 on 1^st January 2020. His position on 31^st December 2020 is as follows:

Bills payable	30,000	Debtors	25,000
Plant	40,000	Bank loan	12,000
Creditors	10,000	Furniture	25,000
Bank balance	22,500	Investment	32,500

Additional information:

He drew $49,200 during the year.

He introduced further capital $28,800 in the middle of the year.

Depreciate furniture by 5% and building 10%.

Required: (a) Closing statement of affairs to find out closing capital; (b) Statement of profit and loss

[Answer: Closing capital = $136,750 or $1,43,000;

Profit for the year = $66,750;

*Opening capital (40,400 + 50,000) = $90,400

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country

PROBLEM: 2D

Rajan keeps his books of account on single entry system provided you the following summary of assets and liabilities of his business for the year ended 31^st December 2020:

Sundry creditors	$50,000	Plant	$50,000
Sundry debtors	90,000	Cash balance	20,000
Stock	30,000

Other information:

The trader started business on 1^st January 2020 with capital of $70,000.

Drawings were $6,000 for every six months.

Write off bad debts $1,000.

Depreciate plant by 10%.

Required: (a) Closing statement of affairs to find out closing capital; (b) Statement of profit and loss

[Answer: Closing capital = $1,34,000 or $1,40,000

Profit for the year = $76,000;

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country

PROBLEM: 2E

Khan Meat Shop started business with equipment of $200,000 and bank balance $20,000 on 1^st January 2020. His financial position at the end of the year shows as:

Sundry debtors	$20,000		Stock	$80,000
Cash at bank	$10,000		Bank overdraft	$60,000

Additional information:

(i) His drawing per month was $3,000.

(ii) Depreciate equipment by 10% p.a.

(iii) Capital introduced on July $50,000.

Required: (a) Statement of affairs showing closing capital; (b) Statement of profit and loss

[Answer: Closing capital = $2,30,000 or $2,50,000

Loss for the year = $4,000;

*Opening capital (2,00,000 + 20,000) = $2,20,000]

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country

PROBLEM: 2F

Jessika Beauty Parlour keeps books of accounts on single entry system provided you the following assets and liabilities at the end of December, 2020:

Equipment	$50,000	Investment	$10,000
Land	1,20,000	Debtors	30,000
Furniture	40,000	Borrow from friend	25,000
Creditors	20,000	Cash and bank	50,000

Additional information:

Opening capital was $200,000.

Drawing during the year was $15,000.

Depreciate equipment and furniture by 10%.

Write off bad debts of $2,000.

Further capital introduced $50,000.

Required: (a) Statement of affairs to find out closing capital; (b) Statement of profit and loss

[Answer: Closing capital = $244,000 or $255,000;

Profit for the year = $9,000]

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country

PROBLEM: 2G

KC Traders started business with a capital of $100,000 on 1^st January 2020. Withdraw $1,000 per month for private expenses. At the end of the year his position was as under: