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Advanced Financial Accounting

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Advance Financial Accounting (FIN-611)
VU
LESSON # 4
SINGLE ENTRY
CALCULATION OF MISSING INFORMATION
As we have already learned that a medium sized entity will not be preparing its books
of accounts based on double entry book keeping system rather it will be maintaining
following set of records in order to prepare its financial statements:
a)
Cash Book
i. Cash Account
ii. Bank Account
b)
Debtors (Accounts Receivables) Ledger
c)
Creditors (Accounts Payables) Ledger
d)
Statement of Affairs (Opening)
e)
Year-end adjustments
i. Closing stock
ii. Depreciation of fixed assets
iii. Provision for doubtful debts
iv. Accruals and prepayments
v. Disposal of Assets
Above information provides sufficient data which is required to prepare Income
Statement and Balance Sheet of the entity.
For students the question becomes more complex when the above set of records is not
completely prepared and some information is missing from these records. In this case
the students have to put expertise in searching out the missing information firstly and
then to prepare financial statements.
Possible missing information and the procedure to ascertain that information is being
discussed hereunder:
Sales
Sales may be of two types (i) Credit Sales, and (ii) Cash Sales. Credit Sales will be
ascertained by preparing Debtors Account while Cash Sales will be found out from the
Cash Book.
Question:
From the following information, find out the credit sales:
Rupees
Opening balance of Debtors
12,000
Returns Inward
5,000
Cash received from debtors
45,000
Discount allowed
3,000
Bad Debts
1,500
Closing balance of Debtors
10,000
Question:
From the following cash transactions ascertain the amount of cash sales:
Rupees
Opening Cash balance
5,000
Opening Bank balance
10,000
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Advance Financial Accounting (FIN-611)
VU
Cash collected from Debtors
20,000
Commission received
5,000
Payment to Creditors
10,000
Cash purchases
20,000
Closing Cash balance
10,000
Closing Bank balance
15,000
Purchases
The purchases may also be of two types (i) Credit Purchases and (ii) Cash Purchases.
Credit Purchases will be ascertained by preparing Creditors Account while Cash
Purchases will be appearing in the Cash Book.
Question:
From the following information, find out the Credit purchases:
Rupees
Opening Creditors
7,600
Cash paid to Creditors
20,000
Discount received
500
Returns outward
2,400
Closing Creditors
9,500
Stocks/Inventory
Opening stock appears in the Statement of Affairs and Closing stock is an item given
in the year end adjustments. Some times these information are hidden in this case the
stock balances will be ascertained through the equation of cost of goods sold i.e.
Opening Stock + Purchases ­ Closing Stock = Cost of Goods Sold
Question:
From the following information, calculate opening stock:
Rupees
Purchases
20,000
Sales
30,000
Closing Stocks
10,000
Gross profit
20% of Sales
Drawings
Some times cash drawings are missing, this information appears in payments side of
the cash book. Cash book is prepared to ascertain drawings as a balancing figure in the
credit side.
Information in Cash Book
Receipts
Rupees
Payments
Rupees
Opening Balance b/f
Cash purchases
Cash Sales
Paid to creditors
Received from debtors
Operating expenses
Other incomes
Purchase of assets
Fresh capital
Repayment of loan
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Advance Financial Accounting (FIN-611)
VU
Loan taken
Drawings
Sales proceeds of assets
Investments
Fixed deposits
Closing balance c/f
Information in Debtors Account
Debit
Rupees
Credit
Rupees
Opening Balance b/f
Cash received from debtors
Credit Sales
Cheques received form
debtors
Discount Allowed
Bad Debts
Sales returns
Closing Balance c/f
Information in Creditors Account
Debit
Rupees
Credit
Rupees
Cash paid to creditors
Opening Balance b/f
Cheques paid to
Credit Purchases
creditors
Discount Received
Purchase returns
Closing Balance c/f
Information in Statement of Affairs (Opening)
Rs.
Rs.
All Assets
Fixed Assets
***
Investments
***
***
Current Assets
***
Less
All Liabilities
Loans
***
***
Current Liabilities
***
Owner's Equity.
***
Practice Questions
Q.1
Ehsan ul Haq has kept records of his business transactions in a single entry form, but
he did not realize that he had to record cash drawings. His bank account for the year
20◊8 is as follows:
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Advance Financial Accounting (FIN-611)
VU
Rs
Rs
Balance 1.1.2008
1,890
Cash withdrawn from bank
5,400
Receipts from debtors
44,656
Trade Creditors
31,695
Loan from T Hughes
2,000
Rent
2,750
Rates
1,316
Drawings
3,095
Sundry Expenses
1,642
Balance 31.12.2008
2,648
48,546
48,546
Records of cash paid were: Sundry expenses Rs. 122; Trade creditors Rs. 642. Cash
sales amounted to Rs. 698. The following information is also available:
Rs
Rs
Cash in Hand
Trade Creditors
48
93
Debtors
4,896
5,091
Rent Owing
6,013
7,132
Rates in Advance
-
250
Van (at valuation)
282
312
Stock
2,800
2,400
11,163
13,021
You are to draw up a trading and profit and loss account for the year ended 31
December 20◊8 and a balance sheet as at that date. Show all of your workings.
Q2.
Following is the position of assets and liabilities of MR. A who keeps his book by
single entry system:
January 01
December 31
2006
2006
Debtors
5,300
8,800
Creditors
1,500
1,950
Stock
1,700
1,900
Fixed assets
2,140
1,740
Following are other details:
Rs.
Total sales (including cash sales Rs. 500)
10,000
Total purchases (including cash purchases Rs.
4,500
2,050)
1,000
General expenses of business
Drawings
300
Cash in hand and at bank
410
Payment for fixed assets
500
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Advance Financial Accounting (FIN-611)
VU
Stock of Rs. 500 was used by the proprietor for his personal use and material of Rs. 50
was used for constructing a part of plant. A how interest on capital at 5% p.a.
You are required to prepare:
a. Trading and profit and loss account for the year ending December 31, 2006, and
b. Balance sheet as on December 31, 2006.
Answers
(Capital in the beginning Rs. 7,000, Gross Profit Rs. 6,250, Net Profit Rs. 3,930,
Balance Sheet total Rs. 12,850).
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Table of Contents:
  1. ACCOUNTING FOR INCOMPLETE RECORDS
  2. PRACTICING ACCOUNTING FOR INCOMPLETE RECORDS
  3. CONVERSION OF SINGLE ENTRY IN DOUBLE ENTRY ACCOUNTING SYSTEM
  4. SINGLE ENTRY CALCULATION OF MISSING INFORMATION
  5. SINGLE ENTRY CALCULATION OF MARKUP AND MARGIN
  6. ACCOUNTING SYSTEM IN NON-PROFIT ORGANIZATIONS
  7. NON-PROFIT ORGANIZATIONS
  8. PREPARATION OF FINANCIAL STATEMENTS OF NON-PROFIT ORGANIZATIONS FROM INCOMPLETE RECORDS
  9. DEPARTMENTAL ACCOUNTS 1
  10. DEPARTMENTAL ACCOUNTS 2
  11. BRANCH ACCOUNTING SYSTEMS
  12. BRANCH ACCOUNTING
  13. BRANCH ACCOUNTING - STOCK AND DEBTOR SYSTEM
  14. STOCK AND DEBTORS SYSTEM
  15. INDEPENDENT BRANCH
  16. BRANCH ACCOUNTING 1
  17. BRANCH ACCOUNTING 2
  18. ESSENTIALS OF PARTNERSHIP
  19. Partnership Accounts Changes in partnership firm
  20. COMPANY ACCOUNTS 1
  21. COMPANY ACCOUNTS 2
  22. Problems Solving
  23. COMPANY ACCOUNTS
  24. RETURNS ON FINANCIAL SOURCES
  25. IASBíS FRAMEWORK
  26. ELEMENTS OF FINANCIAL STATEMENTS
  27. EVENTS AFTER THE BALANCE SHEET DATE
  28. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
  29. ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS 1
  30. ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS 2
  31. BORROWING COST
  32. EXCESS OF THE CARRYING AMOUNT OF THE QUALIFYING ASSET OVER RECOVERABLE AMOUNT
  33. EARNINGS PER SHARE
  34. Earnings per Share
  35. DILUTED EARNINGS PER SHARE
  36. GROUP ACCOUNTS
  37. Pre-acquisition Reserves
  38. GROUP ACCOUNTS: Minority Interest
  39. GROUP ACCOUNTS: Inter Company Trading (P to S)
  40. GROUP ACCOUNTS: Fair Value Adjustments
  41. GROUP ACCOUNTS: Pre-acquistion Profits, Dividends
  42. GROUP ACCOUNTS: Profit & Loss
  43. GROUP ACCOUNTS: Minority Interest, Inter Co.
  44. GROUP ACCOUNTS: Inter Co. Trading (when there is unrealized profit)
  45. Comprehensive Workings in Group Accounts Consolidated Balance Sheet