In a single entry system, it is not possible to maintain all the accounts.
It is also not possible to prepare trading accounts, profit and loss accounts.
It is also difficult to ascertain true profit or loss for a given accounting period.
Generally, there are two methods to find-out profit or loss under single entry system; they are:
(1) Net-worth method
(2) Conversion method
Net worth method is also known statement of affairs method.
Capital is also known as net worth.
In this method, the capital of two different periods is compared to determine profit or loss from business operation.
The opening statement of affairs is prepared to determine opening capital.
The closing statement of affairs is prepared to determine closing capital.
When closing capital is more than opening capital, the result is profit and vice versa.
Generally, the following procedures should be considered for the determination of profit or loss under net worth method:
Step 1: Prepare an opening statement of affairs to determine opening capital.
Step 2: Prepare a closing statement of affairs to determine closing capital.
Step 3: Find out the drawing made by the owner during the year.
Step 4: Find out the additional capital introduced by the owner and interest on capital, if any.
Step 5: Prepare a statement of profit and loss to determine profit or loss.
The opening statement of affairs is prepared to find out opening capital.
The statement of affairs is similar to the balance sheet.
All the assets are recorded on the right-hand side.
All the liabilities are recorded on the left-hand side.
The difference between assets and liabilities is opening capital.
On 1st January 20XX
Liabilities |
Amount |
Assets |
Amount |
Sundry creditors (B/P, A/P) |
xxxx |
Furniture |
xxxx |
Outstanding expenses |
xxxx |
Equipment/machinery |
xxxx |
Loan |
xxxx |
Stock (inventory) |
xxxx |
Other liabilities |
xxxx |
Sundry debtors (B/R, A/R) |
xxxx |
Opening capital (b/f) |
xxxx |
Prepaid expenses |
xxxx |
|
|
Investment |
xxxx |
|
|
Cash and bank |
xxxx |
|
|
Other assets |
xxxx |
|
xxxxx |
|
xxxxx |
Keep in mind (KIM)
Capital = Assets – Liabilities |
The statement of affairs is similar to the balance sheet. |
All the additional information is adjusted with the closing statement of affairs. |
Bank balance is assets but bank overdraft is liabilities. |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1A
Gupta Enterprise keeps its account on a single entry system. The following accounting information is given to you on 1st January 2020:
|
Amount $ |
|
|
Amount $ |
Cash |
15,000 |
|
Stock |
40,000 |
Bills receivable |
45,000 |
|
Sundry debtors |
50,000 |
Furniture |
35,000 |
|
Equipment |
200,000 |
Land and building |
500,000 |
|
Sundry creditors |
50,000 |
Bills payable |
100,000 |
|
Outstanding expenses |
25,000 |
Bank loan |
200,000 |
|
Prepaid expenses |
10,000 |
Required: Statement of Affairs on 1st January 2020
[Answer: Opening capital = $520,000]
SOLUTION:
Statement of Affairs
As on 1st January 2020
Capital and liabilities |
Amount $ |
Assets |
Amount $ |
Bills payable |
100,000 |
Cash |
15,000 |
Bank loan |
200,000 |
Bills receivable |
45,000 |
Sundry creditors |
50,000 |
Furniture |
35,000 |
Outstanding expenses |
25,000 |
Land and building |
500,000 |
Opening capital (balancing figure) |
520,000 |
Stock |
40,000 |
|
|
Sundry debtors |
50,000 |
|
|
Equipment |
200,000 |
|
|
Prepaid expenses |
10,000 |
|
895,000 |
|
895,000 |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1B
Following extracted information is available:
|
Amount $ |
|
Capital at the end of the year |
400,000 |
|
Drawings made during the year |
60,000 |
|
Fresh capital introduce during the year |
100,000 |
|
Profit of the current year |
80,000 |
|
Required: Opening capital
[Answer: Opening capital = $280,000]
SOLUTION
Closing capital + Drawings – Additional capital – Opening capital |
= |
Profit |
400,000 + 60,000 – 100,000 – Opening capital |
= |
80,000 |
360,000 – 80,000 |
= |
Opening capital |
Opening capital |
= |
$280,000 |
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|
Accounting Equation |
|
Basic Journal Entries in Nepali |
|
Basic Journal Entries |
|
Journal Entry and Ledger |
|
Ledger |
|
Subsidiary Book |
|
Cash Book |
|
Trial Balance & Adjusted Trial Balance |
|
Bank Reconciliation Statement (BRS) |
|
Depreciation |
|
Final Accounts: Class 11 |
|
Adjustment in Final Accounts |
|
Capital and Revenue |
|
Single Entry System |
|
Non-Trading Concern |
|
Government Accounting |
|
Goswara Voucher (Journal Voucher) |
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The closing statement of affairs is prepared to find out closing capital.
The statement of affairs is similar to the balance sheet.
All the assets are recorded on the right- hand side.
All the liabilities are recorded on the left-hand side.
If there is any adjustment, it should be adjusted with the closing statement of affairs.
The difference between assets and liabilities is closing capital.
On 31st December 20XX
Liabilities |
|
Amount |
Assets |
|
Amount |
Sundry creditors (B/P, A/P) |
|
xxxx |
Furniture |
xxxx |
|
Loan |
xxxx |
|
Less: Depreciation |
(xxx) |
xxxx |
Less: Loan paid |
(xxx) |
xxxx |
Equipment/machinery |
xxxx |
|
Add: O/s interest |
+ xxx |
xxxx |
Less: Depreciation |
(xxx) |
xxxx |
Outstanding expenses |
|
xxxx |
Stock (inventory) |
|
xxxx |
Other liabilities |
|
xxxx |
Sundry debtors (B/R, A/R) |
xxxx |
|
Closing capital (b/f) |
|
|
Less: Bad debts/PBD |
(xxx) |
xxxx |
|
|
|
Prepaid expenses |
|
xxxx |
|
|
|
Investment |
|
xxxx |
|
|
|
Cash and bank |
|
xxxx |
|
|
|
Other assets |
|
xxxx |
|
|
xxxxx |
|
|
xxxxx |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1C
Gupta Enterprise keeps its account on a single entry system. The following accounting information is given to you on 31st December 2020:
|
Amount $ |
|
|
Amount $ |
Cash |
20,000 |
|
Stock |
140,000 |
Bills receivable |
50,000 |
|
Sundry debtors |
50,000 |
Furniture |
40,000 |
|
Machinery and equipment |
250,000 |
Land and building |
550,000 |
|
Sundry creditors |
130,000 |
Bills payable |
60,000 |
|
Outstanding expenses |
25,000 |
Bank loan |
100,000 |
|
Prepaid expenses |
10,000 |
Required: Statement of affairs on 31st December 2020
[Answer: Closing capital = $7,95,000]
SOLUTION:
Statement of Affairs
As on 31st December 2020
Capital and liabilities |
Amount $ |
Assets |
Amount $ |
Bills payable |
60,000 |
Cash |
20,000 |
Bank loan |
1,00,000 |
Bills receivable |
50,000 |
Sundry creditors |
1,30,000 |
Furniture |
40,000 |
Outstanding expenses |
25,000 |
Land and building |
5,50,000 |
Closing capital (balancing figure) |
7,95,000 |
Stock |
1,40,000 |
|
|
Sundry debtors |
50,000 |
|
|
Machinery and equipment |
2,50,000 |
|
|
Prepaid expenses |
10,000 |
|
11,10,000 |
|
11,10,000 |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1D
Following extracted information is available:
|
Amount $ |
|
Capital at the beginning |
150,000 |
|
Drawings made during the year |
24,000 |
|
Additional capital introduce during the year |
75,500 |
|
Loss of the current year |
(17,275) |
|
Required: Ending capital
[Answer: Ending capital = $184,225]
SOLUTION
Ending capital + Drawings – Additional capital – Beginning capital |
= |
(Loss) |
Ending capital + 24,000 – 75,500 – 150,000 |
= |
–17,275 |
Ending capital – 201,500 |
= |
–17,275 |
Ending capital |
= |
–17,275 + 201,500 |
|
= |
$184,225 |
After preparation of the opening statement of affairs and closing statement of affairs, statement of profit and loss is prepared.
Before preparing a statement of profit and loss, the 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)
This statement is prepared to find out profit earned or loss suffered by the firm from the business.
In a statement of profit and loss, drawing is added but additional capital and interest on capital are deducted from closing capital to determine adjusted capital.
Then opening capital is deducted from adjusted capital to determine profit earned or loss suffered during the period.
As on 31st December 20XX
Particulars |
Amount $ |
Amount $ |
Closing capital |
|
xxxx |
Add: Drawing during the year |
|
xxxx |
Less: Additional or further capital |
xxx |
|
Less: Interest on capital, if any |
xxx |
(xxx) |
Adjusted capital |
|
xxxx |
Less: Opening capital |
|
(xxx) |
Profit (loss) for the year |
|
xxx |
Or
Statement of Profit and Loss
As on 31st December 20XX
Particulars |
Amount $ |
Amount $ |
Closing capital |
|
xxxx |
Add: Drawing during the year |
|
xxxx |
Less: Additional or further capital |
xxx |
|
Less: Interest on capital, if any |
xxx |
(xxx) |
Adjusted capital |
|
xxxx |
Less: Opening capital |
|
(xxx) |
Profit before adjustments |
|
xxxx |
Less: Adjustments: |
|
|
Bad debts/PBD |
xxx |
|
Depreciation on fixed assets |
xxx |
(xxx) |
Profit (loss) for the year |
|
xxxx |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1E
Mr Bipin keeps his transactions on a single entry system. The following extracted information is available:
Transactions |
Amount $ |
Additional capital introduced |
50,000 |
Opening capital |
200,000 |
Interest on capital |
20,000 |
Closing capital |
300,000 |
Drawing made during the year |
75,000 |
Required: Statement of profit or loss as on 31st December 2020
[Answer: Profit for the year = $105,000]
SOLUTION:
Statement of Profit and Loss
As on 31st December 2020
Particulars |
Amount $ |
Closing capital |
300,000 |
Add: Drawing during the year |
75,000 |
Less: Additional or further capital |
(50,000) |
Less: Interest on capital |
(20,000) |
Adjusted capital |
305,000 |
Less: Opening capital |
(200,000) |
Profit for the year |
105,000 |
Or
Statement of Profit and Loss
As on 31st December 2020
Particulars |
Amount $ |
Closing capital |
300,000 |
Add: Drawing during the year |
75,000 |
Less: Additional or further capital |
(50,000) |
Less: Interest on capital |
(20,000) |
Less: Opening capital |
(200,000) |
Profit for the year |
105,000 |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1F
Mr PK keeps his books of accounts under a single entry system. The opening capital as on 1st January 2020 was $265,000. On 31st December 2020 his position was as follows:
Cash in hand |
3,000 |
|
Sundry debtors |
140,000 |
Cash at bank |
20,000 |
|
Stock |
190,000 |
Machinery |
270,000 |
|
Furniture |
15,000 |
Sundry creditors |
290,000 |
|
|
|
Drawings during the year were $40,000.
Required: statement of affairs and profit and loss statement for the year ended 31st December 2020.
[Answer: Closing capital = $348,000; Profit for the year = $123,000]
SOLUTION:
Statement of Affairs
On 31st December 2020
Liabilities |
Amount $ |
Assets |
Amount $ |
Sundry creditors |
290,000 |
Cash in hand |
3,000 |
Closing capital (b/f) |
348,000 |
Cash at bank |
20,000 |
|
|
Machinery |
270,000 |
|
|
Sundry debtors |
140,000 |
|
|
Stock |
190,000 |
|
|
Furniture |
15,000 |
|
638,000 |
|
638,000 |
Statement of Profit and Loss
Particulars |
|
Amount $ |
Closing capital |
|
348,000 |
Add: Drawings |
|
40,000 |
Less: Additional capital |
|
Nil |
Less: Opening capital |
|
(265,000) |
Profit for the year |
|
123,000 |
#####
PROBLEMS AND ANSWERS OF SINGLE ENTRY SYSTEM |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1A
Ms Katrina has a beauty parlour; she keeps her accounting under a single entry system. The following extracted information is available on 1st January 2020:
Ledgers balance |
Amount $ |
|
Ledgers balance |
Amount $ |
Cash in hand |
3,560 |
|
Cash at bank |
6,320 |
Advance from debtors |
2,000 |
|
Sundry creditors |
69,230 |
Machine and equipment |
79,300 |
|
Sundry debtors |
38,000 |
Stock |
32,650 |
|
Furniture |
8,400 |
Required: Opening capital at the end of January
[Answer: Opening capital = $97,000]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1B
Ms Katrina has a beauty parlour; she keeps her accounting under a single entry system. The following extracted information is available on 31st December 2020:
Ledgers balance |
Amount $ |
|
Ledgers balance |
Amount $ |
Cash in hand |
4,560 |
|
Cash at bank |
20,200 |
Outstanding electricity bill |
560 |
|
Sundry creditors |
9,500 |
Machine and equipment |
79,300 |
|
Sundry debtors |
8,000 |
Stock |
15,000 |
|
Furniture |
11,300 |
Required: Closing capital at the end of December
[Answer: Closing capital = $128,300]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1C
Ms Katrina has a beauty parlour; she keeps her accounting under a single entry system. The following extracted information is available for the current year:
Capital at the beginning $97,000
Capital at the ending $128,300
Additional capital $6,000
Drawings per month $1,000
Required: Profit or loss for the year
[Answer: Profit $37,300]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1D
Following extracted information is available:
|
Amount $ |
|
Capital at the ending |
16,40,000 |
|
Drawings made during the year |
80,000 |
|
Additional capital introduce during the year |
320,000 |
|
Loss of the current year |
(100,000) |
|
Required: Beginning capital
[Answer: Beginning capital = $15,00,000]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1E
Following extracted information is available:
|
Amount $ |
|
Profit during the year |
23,000 |
|
Drawings made during the year |
48,000 |
|
Ending capital |
450,000 |
|
Beginning capital |
400,000 |
|
Required: Additional capital
[Answer: Additional capital = $75,000]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1F
Hari Prasad keeps his books of accounts under single entry system. The opening capital as on 1st January 2020 was $26,500. On 31st December 2020 his position was as follows:
Cash in hand |
$300 |
|
Sundry debtors |
$ 14,000 |
Cash at bank |
2,000 |
|
Stock |
19,000 |
Plant and machinery |
27,000 |
|
Furniture |
1,500 |
Sundry creditors |
29,000 |
|
|
|
Required: statement of affairs and profit and loss statement for the year ended.
[Answer: Closing capital = $34,800; Profit for the year = $8,300]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 1G
Manju started a boutique business with $50,000 cash and stock in trade of $30,000. She keeps accounts under SES. Her position at the end of the year 2020 revealed:
Stock at the end |
$20,000 |
|
Machinery less depreciation |
$30,000 |
Sundry debtors |
50,000 |
|
Cash at bank |
20,000 |
Sundry creditors |
10,000 |
|
|
|
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 = $110,000; Profit for the year = $30,000;
*Opening capital (50,000 + 30,000) = $80,000]
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