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Single Entry System | Statement of Affairs | Statement of P&L

Arjun EP

Published on: May 27, 2021

Calculation of Profit or Loss under Single Entry System

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

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.

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

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.

Statement of Affairs

On 1^st 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 1^st January 2020

[Answer: Opening capital = $520,000]

SOLUTION:

Statement of Affairs

As on 1^st 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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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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(B) Closing Statement of Affairs | Closing Capital | Ending Capital

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.

Statement of Affairs

On 31^st 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 31^st 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 31^st December 2020

[Answer: Closing capital = $7,95,000]

SOLUTION:

Statement of Affairs

As on 31^st 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

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

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.

Statement of Profit and Loss

As on 31^st 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

Statement of Profit and Loss

As on 31^st 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 31^st December 2020

[Answer: Profit for the year = $105,000]

SOLUTION:

Statement of Profit and Loss

As on 31^st 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

Statement of Profit and Loss

As on 31^st 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 1^st January 2020 was $265,000. On 31^st 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 31^st December 2020.

[Answer: Closing capital = $348,000; Profit for the year = $123,000]

SOLUTION:

Statement of Affairs

On 31^st 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

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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 1^st 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 31^st 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 1^st January 2020 was $26,500. On 31^st 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: