GSEB Class 11 Solutions Chapter 10 Accounts from Incomplete Records

Question 1. Write the Correct Option From Those Given Below Each Question:

 

Question 1. Normally who uses single entry accounting methods ?
(a) Businessmen
(b) Small retailers
(c) Public companies
(d) Government companies
Answer: (b) Small retailers
In simple words: Usually, smaller shop owners and businesses often use single entry bookkeeping methods because it's a simpler way to manage their accounts. They don't need a complex system like bigger companies.

Exam Tip: Remember that single entry systems are typically adopted by small businesses for their simplicity, as they don't require extensive record-keeping like double-entry systems.

 

Question 2. Which statement is to be prepared to find out opening capital in single entry system ?
(a) Trading account
(b) Statement of affairs
(c) Statement of profit-loss
(d) Statement of stock
Answer: (b) Statement of affairs
In simple words: To find out the starting capital in a single entry system, you need to prepare a 'Statement of Affairs'. This document helps show your financial status at the beginning.

Exam Tip: The Statement of Affairs is crucial in a single entry system for determining both opening and closing capital when proper books of account are not maintained.

 

Question 3. Under Single Entry System, ......................... .
(a) only one effect for all transactions.
(b) two effect (entry) for all transactions.
(c) no effect for any transaction.
(d) only one effect for some transactions and two effects of remaining transactions.
Answer: (d) only one effect for some transactions and two effects of remaining transactions.
In simple words: In a single entry system, some transactions only show one effect, while other transactions might show two effects. It's not a complete double-entry method for all items.

Exam Tip: Understand that the single entry system is an incomplete method where transactions are not uniformly recorded with dual effects, making it a hybrid approach.

 

Question 4. What should be prepared to find capital in capital comparision method ?
(a) Statement of profit-loss
(b) Statement of affairs
(c) Statement of goods for business
(d) Balance sheet
Answer: (b) Statement of affairs
In simple words: To calculate capital using the comparison method, you must prepare a 'Statement of Affairs'. This document helps determine your financial position and capital at specific times.

Exam Tip: The capital comparison method relies on the Statement of Affairs to determine capital by comparing opening and closing positions, especially in incomplete record systems.

 

Question 5. Single entery system is also called .......................... .
(a) Accounts from complete records
(b) Accounts from incomplete records
(c) Double entry accounting system
(d) Independent accounting system
Answer: (b) Accounts from incomplete records
In simple words: The single entry system is also known as 'Accounts from incomplete records'. This is because it doesn't maintain full, double-entry records for every transaction.

Exam Tip: Recognize that 'single entry system' and 'accounts from incomplete records' are often used interchangeably, both referring to a less comprehensive accounting method.

Question 2. Answer the Following Questions in One or Two Sentences:

 

Question (1). What is Single Entry System ?
Answer: The Single Entry System is an incomplete accounting method where typically only cash transactions and personal accounts are recorded. It does not maintain the complete dual aspects of every business transaction, making it a simpler but less comprehensive system.
In simple words: Single Entry System means keeping incomplete financial records. Only cash and personal account deals are usually noted, not both sides of every transaction.

Exam Tip: When defining the Single Entry System, emphasize its incompleteness and the limited scope of transactions it records (cash and personal accounts).

 

Question (2). How does single entry system differ from double entry system?
Answer: The single entry system differs from the double entry system in the following ways:

In simple words: Single entry differs from double entry because single entry doesn't record both sides of every deal, only keeps personal accounts, and can't make a trial balance. Double entry, however, notes both sides, keeps all accounts, and allows for a trial balance.

Exam Tip: When differentiating between single and double entry systems, focus on the core differences: dual effect recording, types of accounts maintained, and the ability to prepare a trial balance and financial statements.

 

Question (3). What is Statement of Affairs ?
Answer: This statement resembles a Balance sheet. On its left side, liabilities and payables are displayed, while on the right side, assets and receivables are shown.
In simple words: A Statement of Affairs is like a simple balance sheet. It shows what a business owes on the left and what it owns on the right.

Exam Tip: Define Statement of Affairs as a substitute for a balance sheet in single entry systems, listing assets and liabilities to find capital.

 

Question (4). Which capitals are compared in capital comparision method?
Answer: In the capital comparison method, the closing capital is compared with the opening capital.
In simple words: The capital comparison method compares the capital at the end of the period with the capital at the beginning of the period.

Exam Tip: Highlight that the capital comparison method primarily uses opening and closing capital figures to determine profit or loss.

 

Question (5). Which items are added or which items are deducted from closing capital in statement showing profit or loss ?
Answer: Cash withdrawals, goods taken out, and personal expenses paid from the business are added to the closing capital. Conversely, opening capital and additional capital introduced are deducted from the closing capital when preparing the statement to show profit or loss.
In simple words: When figuring profit or loss, you add money or goods taken out for personal use to the closing capital. Then, you subtract the starting capital and any new capital brought in.

Exam Tip: Remember the adjustments to closing capital: add drawings (cash, goods, personal expenses) and deduct opening and additional capital to correctly calculate profit or loss.

Question 3. Answer the Following Questions in Detail:

 

Question (1). What is Single Entry System ? Give the characteristics of Single Entry System.
Answer:
Meaning: Small traders, such as hawkers, sole traders, and small shopkeepers, typically do not wish to maintain all accounting books. As needed, they only maintain a cashbook and ledger, recording transactions solely related to cash and personal accounts. In this system, the dual effect may not be given to every business transaction. Often, only one effect is recorded for some transactions, which is why it is called the Single Entry System.

Definitions: According to Eric Kohler, "single entry system is, a system of book-keeping in which as a rule only record of cash and of personal accounts are maintained, it is always incomplete double entry, varying with circumstance.”

According to R. N. Carter, “Single entry system is a method or a variety of methods, employed for the recording of transactions, which ignore the two-fold aspects and consequently fails to provide the businessman with the information necessary for him to be able to ascertain the financial position.”

Explanation: The single entry system is an incomplete accounting method. In this system, certain transactions might have two effects, while others have just one effect. For example, when cash is received from a customer (debtor), two effects are recorded: one in the cashbook and the second in the customer's A/c. However, when furniture is bought with cash, only the cash payment effect is shown in the cashbook, and the second effect is not entered in the furniture A/c. This system does not maintain Real accounts or Nominal accounts.

For Extra Knowledge.

Characteristics of Single Entry System:

1. Incomplete records: Typically, only cash transactions and personal account transactions are recorded. This represents an incomplete accounting method.

2. Mixture of Single Entry and Double Entry System: Many transactions are recorded with just one effect, while some others show a double effect, and several transactions are not recorded at all.

3. Books as per requirement: Small traders maintain only a few account books, such as a cashbook and ledger, according to their specific needs.

4. Only personal accounts: Only personal accounts are kept in the ledger.

5. Small retailers: Typically, small business owners such as hawkers, small shopkeepers, and street vendors use this system to prepare their accounts.

6. Records: Full accounting records are not kept.

7. Uniformity: This system lacks uniformity in how traders maintain their books of accounts.

8. Annual accounts: Under this system, a trial balance and balance sheet cannot be prepared.

9. Entry for internal transactions: This method does not record (or enter) internal business transactions, such as depreciation on assets or interest on capital.
In simple words:
Meaning: Small business owners often don't keep full accounting records. They mostly record cash deals and personal accounts. Sometimes, only one side of a transaction is noted, which is why it's called the Single Entry System.
Definitions: Eric Kohler said single entry is a bookkeeping method where mostly cash and personal accounts are recorded, and it's always incomplete double entry. R. N. Carter said it's a way of recording deals that ignores dual aspects, so it doesn't give a businessman full financial information.
Explanation: Single entry is an incomplete way of keeping books. Some deals show two effects, others only one. For instance, getting cash from a customer affects cash and their account (two effects). Buying furniture with cash only shows the cash payment, not the furniture account, because real and nominal accounts are not kept.
Characteristics:
1. It means incomplete records, as only cash and personal deals are usually written down, not everything.
2. It's a mix of single and double entry. Most deals have one effect recorded, some have two, and some are not recorded at all.
3. Small business owners keep only the books they need, like a cashbook and ledger.
4. Only personal accounts are kept in the main book of accounts.
5. Small businesses like hawkers and street vendors often use this system to keep their accounts simple.
6. Complete accounting records are not maintained in this system.
7. There's no standard way for traders to keep books with this system, so it can vary.
8. You cannot prepare a trial balance or a balance sheet with this system.
9. Internal business deals like depreciation or interest on capital are not recorded in this method.

Exam Tip: When explaining the Single Entry System, start with its basic definition, then provide key characteristics like its incomplete nature and focus on personal and cash accounts. Mention how it differs from double-entry by not always recording dual effects.

 

Question (2). Describe the uses (advantages) of single entry system.
Answer: The advantages of the single entry system are as follows:

• Limited object: This method is highly beneficial for small traders, such as hawkers, small retailers, or street vendors, as their requirement for preparing accounts is restricted.
• Time and Expense: With this method, small traders can prepare their account books with less expense and time, as not all accounts are prepared.
• Limited books: Small traders maintain books according to their business needs. They typically prepare only personal accounts, thus needing fewer books.

In simple words:
Limited object: It's good for small traders because they don't need detailed accounts, so it fits their limited needs.
Time and Expense: Small traders save money and time because they don't have to prepare all accounts.
Limited books: Small traders only keep books they need, usually just personal accounts, meaning fewer books are required.

Exam Tip: When discussing advantages, highlight simplicity, cost-effectiveness, and suitability for small businesses with limited accounting needs.

 

Question (3). Discuss the limitations of Single entry system in detail.
Answer: The limitations of the single entry system are as follows:

1. Importance only to personal accounts: In this system, emphasis is placed solely on personal accounts. Impersonal accounts are not opened in the ledger, which prevents obtaining information for all accounts.

2. Trial balance can't be prepared: Since the dual effect of all transactions is not recorded, a trial balance cannot be prepared. Consequently, it is impossible to verify the arithmetical accuracy of the accounts.

3. Profit or Loss can't be ascertained: Since nominal accounts are not prepared, it is not possible to determine the profit or loss at the conclusion of the year.

4. Financial position can't be obtained: In this method, asset accounts are not maintained, and a trial balance is also not prepared. Therefore, preparing final accounts is impossible, and consequently, the true and fair financial position of the business cannot be known.

5. Statistical information can't be obtained: Since the dual effects of all transactions are not recorded, it is not feasible to obtain statistical information.

6. Errors of rectifications are not easy: Errors can be easily detected and prevented in the double entry system, but this is much harder in the single entry system.

7. Possibilities of frauds: It is impossible to check the arithmetical accuracy of accounts in this system, which leads to increased chances of errors, account manipulation, and frauds.

8. Comparison is not possible: Because of incomplete record of information, comparing accounts with prior years is not possible in this system.

9. Difficulties: Inadequate information leads to difficulties in making decisions regarding purchase price, obtaining a loan, or insurance, among other things.
In simple words:
1. This system only focuses on personal accounts, not impersonal ones. So, you can't get full details about all types of accounts.
2. Because not all transactions are recorded twice, a trial balance can't be made. This means you can't check if the account math is correct.
3. Nominal accounts are not kept, so you cannot find out the exact profit or loss at the year-end.
4. You can't get the financial position because asset accounts aren't kept, and no trial balance or final accounts are made. This means you don't know the business's real financial health.
5. Without recording both sides of all transactions, you cannot get useful statistical information.
6. Finding and fixing errors is simple in double entry, but it's much more difficult with a single entry system.
7. You can't check if the math in the accounts is right, which makes it easier for mistakes, changes, and frauds to happen.
8. You can't compare accounts with past years because there isn't enough information recorded.
9. Not having enough information makes it hard to make decisions about things like buying prices, getting loans, or insurance.

Exam Tip: When listing limitations, remember the key drawbacks: lack of complete financial picture, difficulty in error detection and fraud prevention, and challenges in decision-making and comparisons due to incomplete records.

 

Question (4). Explain the difference between Single Entry System and Double Entry System.
Answer:

In simple words: The Single Entry System is an incomplete way of accounting, recording only one side of most deals and focusing on personal accounts. It can't prepare a trial balance or exact profit/loss, and its financial position is uncertain. Errors are hard to find, and it's not accepted as authentic by authorities. It's cheap and simple, suited for small traders, but offers limited information and control. The Double Entry System, however, is a complete method that records both sides of every transaction, maintains all accounts, and allows for a trial balance and accurate profit/loss. It gives a clear financial position, helps detect errors and prevents fraud, and is considered reliable and authentic by courts. While more costly and complex, it offers comprehensive information and better control, suitable for all business types.

Exam Tip: Focus on contrasting the two systems across key accounting principles: completeness of records, dual aspect concept, types of accounts maintained, ability to generate financial statements, reliability for decision-making, and legal acceptance.

 

Question (5). What is Statement of Affairs ? Give specimen to explain.
Answer:
Meaning: A statement that presents the estimated balances of a business's various assets and liabilities on a specific date is termed a 'Statement of Affairs.'
Under this system, the proprietor's capital is determined by preparing a statement of affairs. This statement resembles a Balance Sheet, with liabilities presented on the left side, and assets and receivables are shown on the right side. The difference between the total of the asset side and the total of the liabilities side is known as capital. In other words, capital is calculated by using the following accounting equation: Capital = Total amount of Assets – Total amount of Liabilities.
Objective: With this system, the profit earned or loss incurred by the business in any accounting year can be determined by comparing the capital at the end of the year with the capital at the start of that same accounting year. In the single entry system, a capital account is not maintained. Therefore, a statement of affairs is prepared to ascertain the opening and closing capital of the business on a specific date.
Specimen: The specimen statement of affairs is as follows:

Forming: A Statement of Affairs is similar to a Balance Sheet. Liabilities, other than capital, are displayed on the left side, and Assets and Receivables are shown on the right side. After deducting all liabilities (excluding capital) from the total asset side, the resulting difference is called capital.
By displaying the opening balances of assets, receivables, and liabilities in an opening statement of affairs, the resulting difference is identified as opening capital. Likewise, by showing the closing balances of assets, receivables, and liabilities in a closing statement of affairs, the resulting difference is identified as closing capital. The amounts of assets, receivables, and liabilities can be determined from the accounts. If the accounts are not maintained, then their estimated value can be used.
Summary: A statement of affairs is prepared using balances and estimated values from incomplete records. Based on this statement, a true and fair view of a business's financial health cannot be obtained.
In simple words:
Meaning: A 'Statement of Affairs' is a document that shows a business's estimated assets and debts on a certain date. You find the owner's capital by making this statement, which looks like a balance sheet, listing debts on the left and assets on the right. Capital is the difference between total assets and total liabilities.
Objective: This system helps figure out business profit or loss by comparing capital at the year's start and end. Since a capital account isn't kept in single entry, a statement of affairs is made to find opening and closing capital.
Forming: A Statement of Affairs is like a Balance sheet. It lists liabilities (not capital) on the left and assets/receivables on the right. The remaining amount after subtracting debts from assets is called capital. When you show the starting amounts of assets, receivables, and debts in a statement of affairs, the leftover amount is opening capital. If you show the ending amounts, the leftover amount is closing capital. You can find out how much assets, receivables, and debts are worth from the records. If records aren't kept, you can use estimated values.
Summary: A statement of affairs uses estimated figures from incomplete records. Because of this, it can't give a real and accurate picture of a business's money situation.

Exam Tip: To explain Statement of Affairs, include its definition, objective (to find capital and profit/loss), and clearly illustrate its format as a substitute for a balance sheet.

 

Question (6). Explain the difference between Statement of Affairs and Balance Sheet.
Answer:

In simple words: A Statement of Affairs shows estimated assets and debts from incomplete records and is used in single entry accounting to find capital and profit/loss. It can't use a trial balance and isn't fully reliable for decision-making or official purposes. A Balance Sheet, however, shows exact financial position from complete records in a double entry system, requiring a trial balance and providing highly reliable information for all business decisions and legal recognition.

Exam Tip: When comparing, highlight that a Statement of Affairs relies on estimates from incomplete records to find capital, while a Balance Sheet offers precise financial data from complete double-entry records, used for true financial position.

 

Question (7). Discuss in detail how to determine profit or loss in capital comparision method.
Answer: The capital comparison method is used to determine the profit or loss amount within the single entry system. In this method, opening capital and closing capital are compared, therefore it is known as the comparison of capital method.
Steps: The following steps should be followed to ascertain profit or loss and also for preparing the Balance Sheet using the capital comparison method:
1. First, prepare an opening statement of affairs to determine the opening capital.
2. Next, prepare a closing statement of affairs to determine the closing capital.
3. Prepare a statement indicating profit or loss, as per the specimen provided below, to determine net profit or loss after adjustments.
4. Finally, prepare the Balance Sheet after taking all adjustments into account.
The specimen statement given as follows can be used to find out profit or loss :

The single entry system is an incomplete accounting method; thus, adequate information cannot be acquired from it. Nominal accounts are not maintained, which means a Profit and Loss Account cannot be prepared. Therefore, opening capital and closing capital are compared to ascertain the profit or loss.
If the closing capital exceeds the opening capital, the difference is considered as profit. Profit = Closing capital – Opening capital
If the closing capital is less than the opening capital, the difference is treated as a loss. Loss = Opening capital – Closing capital
Any total amount withdrawn during the year should be added to the closing capital, and any additional capital introduced must be subtracted from the closing capital.
Subsequently, both capital balances are compared to determine the profit or loss. If the outcome is positive, it is considered a profit, and if the outcome is negative, it is treated as a loss.
In simple words: The capital comparison method helps calculate the profit or loss in a single entry accounting system.
Steps: To find profit or loss and make a Balance Sheet using the capital comparison method, you need to follow these steps:
1. First, make an opening statement of affairs to find the starting capital.
2. Then, prepare a closing statement of affairs to find the ending capital.
3. Create a statement that shows profit or loss, using the example given, to find the net profit or loss after making changes.
4. Lastly, create the Balance Sheet after all the changes have been considered.
The single entry is an incomplete accounting method, so you can't get enough information from it. Since nominal accounts aren't kept, a Profit and Loss Account can't be made. So, to find the profit or loss, opening and closing capital are compared.
If ending capital is more than starting capital, the difference is profit. Profit equals closing capital minus opening capital.
If ending capital is less than starting capital, the difference is a loss. Loss equals opening capital minus opening capital.
All money or goods taken out during the year must be added to the closing capital, and any extra capital put in must be subtracted from it. Afterward, both capital amounts are compared to find out if there's a profit or loss. A positive result means profit, and a negative result means loss.

Exam Tip: Outline the steps clearly: first, determine opening and closing capital using Statements of Affairs, then use a profit/loss statement to adjust for drawings and additional capital to find the net profit or loss.

 

Question 4. Smt. Maltiben keeps her books of account as per single entry system. Her assets and liabilities as on 1 - 4 - '15 and 31 - 3 - '16 are as under :

During the year, her cash withdrawal amounted to Rs. 13,200, and goods withdrawal was Rs. 4,200. She also introduced Rs. 12,000 as additional capital into the business. Prepare a statement showing the profit or loss for the year ending 31 - 3 - '16.
Answer: To determine Smt. Maltiben's profit or loss, you would first prepare an Opening Statement of Affairs as of 1-4-'15 and a Closing Statement of Affairs as of 31-3-'16, using the provided asset and liability figures. These statements help ascertain the opening and closing capital. Next, a Statement showing Profit or Loss would be prepared. In this statement, you would start with the closing capital, add back any cash and goods withdrawals (drawings) made during the year, and then subtract any additional capital introduced. Finally, the opening capital would be deducted from this adjusted closing capital. The resulting difference would indicate the net profit or loss for the year.
In simple words: To find Smt. Maltiben's profit or loss, first make two statements of affairs to get her starting and ending capital. Then, in a profit/loss statement, take the ending capital, add back all money and goods she took out, subtract any extra money she put in, and finally, subtract her starting capital. The final number tells you her profit or loss.

Exam Tip: For problems involving profit/loss determination in single entry, remember the sequence: Opening Statement of Affairs, Closing Statement of Affairs, and then the Statement of Profit or Loss, with careful adjustment for drawings and additional capital.

 

Question 5. Smt. Shubhaben Nanavati keeps her accounts as per single entry system. From the following information find out the profit / loss by capital comparison method :

During the year, she had brought her personal scooter worth Rs. 11,000 in the business and she had withdrawn Rs. 1,750 by cash. Her personal LIC premium of Rs. 3,500 and income tax of Rs. 4,100 are paid from business, while goods of Rs. 1,400 were taken away from business for her personal use.
Answer:
The following statements show the profit or loss for Smt. Shubhaben Nanavati by using the capital comparison method:




In simple words: First, we find out how much money the business has at the start and end by listing all its assets and liabilities. Then, we add back any money taken out by the owner and subtract any extra money put in. Finally, we compare the adjusted ending money with the starting money to see if the business made a profit or a loss.

Exam Tip: Remember to clearly separate opening and closing statements of affairs. Accurately identify and incorporate all additions (drawings) and deductions (additional capital) when calculating the adjusted capital to find the true profit or loss.

 

Question 6. From the following information, prepare a statement showing profit / loss of Sureshbhai Patel for the year ending 31st March, 2016 :

Sureshbhai has withdrawn Rs. 300 every month. He brought Rs. 6,000 as additional capital during the year. Provide depreciation on machinery and furniture at 10%. Provide bad debts reserve on debtors at 5%.
Answer:
The following statements show the profit or loss for Sureshbhai Patel for the year ending 31st March, 2016:




In simple words: To calculate Sureshbhai's profit or loss, we first figure out his opening and closing capital by preparing statements of affairs. We add his total monthly withdrawals to the closing capital and then subtract his opening capital and any extra capital he brought in during the year. Finally, we account for depreciation and bad debt reserves to find the net profit or loss.

Exam Tip: Pay close attention to adjustments like depreciation and bad debt reserves, applying them to the correct asset values and ensuring they are accounted for in the final profit/loss calculation.

 

Question 7. Ramesh Priyadarshani keeps his account as per single entry system. The statement of his business condition as on 1 – 4 -'16 is as under:

Balance as on 31-3-'17 were as under:
Additional information:
During the year he had brought his personal furniture worth Rs. 4,400 in business and he had withdrawn Rs. 1,100 per month. His LIC premium of Rs. 2,200 and income tax of Rs. 4,400 were paid from the business. Provide 5% bad debts reserve on debtors. Calculate depreciation on building and furniture of Rs. 2,400 and Rs. 1,000 respectively.
From the above information, prepare a statement showing profit /loss for the period ending 31 - 3 – '17.
Answer:
The following statements show the profit or loss for Ramesh Priyadarshani for the period ending 31-3-'17:



In simple words: First, establish the business's opening and closing capital by creating statements of affairs. Then, adjust the closing capital by adding back withdrawals and personal payments, and subtracting any new capital introduced. Finally, subtract the opening capital and any other adjustments like bad debt reserves and depreciation to determine the net profit or loss.

Exam Tip: Be careful to apply depreciation and bad debt reserves to the correct closing asset values. Ensure all personal transactions are properly adjusted against capital to arrive at the true profit or loss.

 

Question 8. Shri Vivek keeps his accounts as per single entry system. His particulars of assets and liabilities are as under:

Additional Information:
His cash withdrawals were Rs. 6,000 as on 1 – 7 – '15 and Rs. 4,000 as on 1 – 10 – '15. On 1 – 9 – '15, he brought personal furniture worth Rs. 15,000, personal computer worth Rs. 24,000 and cash of Rs. 21,000 in the business.
Depreciation is to be provided at 10% p.a. on land-building and furniture and 20% p.a. on computer. Provide 5% for doubtful debts on debtors. Interest is to be calculated at 10% and at 8% p.a. on drawings.
From the above information, prepare statement showing profit /loss and a balance sheet as on 31-3 – '16 in the books of Vivek.
Answer:
The following statements show the profit or loss and balance sheet for Shri Vivek for the year ending 31-3-'16:

Explanation:

(1) Depreciation on Land-Building at 10% on Rs. 1,40,000 for 1 year
\( = \) Depreciation Rs. 1,40,000 \( \times \frac{10}{100} \times 1 = \) 14,000
(2) Depreciation on opening balance of furniture at 10% on Rs. 30,000 for 1 year
\( = 30,000 \times \frac{10}{100} \times 1 = \) Rs. 3,000
7 month's depreciation on personal furniture brought in as on 1 – 9 – '15
\( = \) Rs. 15,000 \( \times \frac{10}{100} \times \frac{7}{12} = \) Rs. 875
\( \implies \) Total depreciation on furniture \( = \) Rs. 3,000 \( + \) Rs. 875 \( = \) Rs. 3,875
(3) 7 month's depreciation on personal computer brought in as on 1 – 9 – '15 at 20% on Rs. 24,000
\( = \) Rs. 24,000 \( \times \frac{20}{100} \times \frac{7}{12} = \) Rs. 2,800
(4) Interest on capital at 10 % :
On opening balance of Rs. 2,71,600 for 1 year \( = 2,71,600 \times \frac{10}{100} \times 1 \)
\( = \) Rs. 27,160
\( + \) 7 month's interest on additional capital brought in as on 1 – 9 – '15 on Rs. 60,000
\( = \) Rs. 60,000 \( \times \frac{10}{100} \times \frac{7}{12} = \) Rs. 3,500
\( \implies \) Total interest on capital \( = \) (Rs. 27,160 \( + \) Rs. 3,500) \( = \) Rs. 30,660
(5) 5% Bad debts reserve on debtors \( = 32,000 \times \frac{5}{100} = \) Rs. 1,600
(6) Interest in drawings at 8 %:
9 month's interest on Rs. 6,000 \( = 6,000 \times \frac{8}{100} \times \frac{9}{12} = \) Rs. 360
6 month's interest on Rs. 4,000 \( = 4,000 \times \frac{8}{100} \times \frac{6}{12} = \) Rs. 160
\( \implies \) Total interest on drawings \( = \) Rs. 520

In simple words: To prepare the profit/loss statement, first, determine the opening and closing capital using statements of affairs, carefully noting all assets and liabilities. Then, adjust the closing capital for withdrawals and additional capital, and apply all necessary adjustments like depreciation, bad debt reserves, and interest on capital and drawings to calculate the net profit or loss. Finally, prepare a balance sheet incorporating all adjusted values to show the financial standing.

Exam Tip: Be meticulous with calculations for depreciation, interest, and bad debt reserves, as these significantly impact the final profit/loss figure and the balance sheet totals. Ensure all adjustments are applied correctly to both statements.