accounts - single entry

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Accounts from Incomplete Records

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Accounting records, which are not strictly kept according to double entry system are known as incomplete records. OR A system of bookkeeping in which a business keeps only a single account showing amounts due and amounts owed. SINGLE ENTRY BOOK - KEEPING

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It is an unsystematic method of recording transactions. Generally, records for cash transactions and personal accounts are properly maintained and there is no information regarding revenue or gains, expenses or losses, assets and liabilities. Personal transactions of owners may also be recorded in the cash book. Different organizations maintain records according to their convenience and needs, and their accounts are not comparable due to lack of uniformity. Features of Single Entry

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(e) To ascertain profit or loss or for obtaining any other information, necessary figures can be collected only from the original vouchers such as sales invoice or purchase invoice, etc. Thus, are dependent on original vouchers. The profit or loss for the year cannot be ascertained under this system with high degree of accuracy. The balance sheet also may not reflect the complete and true position of assets and liabilities.

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Reasons of Incompleteness This system can be adopted by people who do not have the proper knowledge of accounting principles. (b) It is an inexpensive mode of maintaining records. Cost involved is low as specialized accountants are not appointed by the organizations. (c) Time consumed in maintaining records is less as only a few books are maintained. (d) It is a convenient mode of maintaining records as the owner may record only important transactions according to the need of the business.

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The limitations of incomplete records are as follows : As double entry system is not followed, a trial balance cannot be prepared and accuracy of accounts cannot be ensured. (b) Correct ascertainment and evaluation of financial result of business operations can not be made. (c) Analysis of profitability, liquidity and solvency of the business cannot be done. This may cause a problem in raising funds from outsiders and planning future business activities. (d) The owners face great difficulty in filing an insurance claim with an insurance company in case of loss of inventory by fire or theft. (e) It becomes difficult to convince the income tax authorities about the reliability of the computed income.

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Statements of assets and liabilities as at the beginning and at the end of the relevant accounting period are prepared to ascertain the amount of change in the capital during the period. Such a statement is known as statement of affairs. It shows assets on one side and the liabilities on the other just as in case of a balance sheet. The difference between the totals of the two sides (balancing figure) is the capital. Statement of affairs resembles balance sheet, it is not called a balance sheet because the data is not wholly based on ledger balances. The amounts of items like fixed assets, outstanding expenses, bank balances, etc. are ascertained from the relevant documents and physical count. Preparing Statement of Affair

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Statement of Affairs as at Liabilities Amt. Assets Amt. Bills payable Creditors Outstanding expenses Capital (balancing figure) xxx xxx xxx xxx Land and Building Machinery Furniture Stock Debtors Cash and Bank Prepaid expenses Capital (balancing figure) xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx

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Once the amount of capital, both at the beginning and at the end is computed with the help of statement of affairs, a statement of profit and loss is prepared to ascertain the exact amount of profit or loss made during the year. The difference between the opening and closing capital represents its increase or decrease which is to be adjusted for withdrawals made by the owner or any fresh capital introduced by him during the accounting period in order to arrive at the amount of profit or loss made during the period. Preparation of Statement of Profit and loss

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Statement of Profit or Loss for the year ended ........ Particulars Amount Closing Capital Add:- Drawings during the year Less- Additional capital introduced during the year Adjusted capital at the end of year Less:- Opening Capital Profit or Loss made during the year xxx xxx xxx xxx xxx xxx

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