Samacheer Kalvi Class 12 Accountancy Solutions Chapter 1 Accounts from Incomplete Records

I Multiple Choice Questions

Choose the correct answer

 

Question 1. Incomplete records are generally maintained by
(a) A company
(b) Government
(c) Small sized sole trader business
(d) Multinational enterprises
Answer: (c) Small sized sole trader business
In simple words: Smaller businesses often keep incomplete records because they don't have enough resources or need to follow strict double-entry accounting rules. This system is usually simpler for them to manage.

🎯 Exam Tip: Remember that incomplete records are usually associated with businesses that have fewer transactions and simpler structures.

 

Question 2. Statement of affairs is a
(a) Statement of income and expenditure
(b) Statement of assets and liabilities
(c) Summary of cash transactions
(d) Summary of credit transactions
Answer: (b) Statement of assets and liabilities
In simple words: A statement of affairs shows what a business owns (assets) and what it owes (liabilities) on a certain date. It's like a snapshot of the business's financial position at that time.

🎯 Exam Tip: Recognize that a statement of affairs is a substitute for a balance sheet when complete accounting records are not available, focusing on assets and liabilities.

 

Question 3. Opening statement of affairs is usually prepared to find out the
(a) Capital in the beginning of the year
(b) Capital at the end of the year
(c) Bills payable accepted during the year
(d) Loss occurred during the year
Answer: (a) Capital in the beginning of the year
In simple words: The first statement of affairs made at the start of a period helps to figure out how much money (capital) the owner put into the business at the very beginning. This starting capital is important for calculating profit later.

🎯 Exam Tip: Always remember that the primary purpose of an opening statement of affairs is to determine the opening capital, which is a key figure for profit and loss calculation in single entry systems.

 

Question 4. The excess of assets over liabilities is
(a) Loss
(b) Cash
(c) Capital
(d) Profit
Answer: (c) Capital
In simple words: When a business has more things it owns (assets) than things it owes (liabilities), the extra amount is called capital. It shows the owner's investment in the business.

🎯 Exam Tip: This is the fundamental accounting equation: Assets - Liabilities = Capital. Understanding this relationship is crucial for all accounting concepts.

 

Question 5. Which of the following items relating to bills payable is transferred to the total creditors account?
(a) Loss
(b) Cash
(c) Capital
(d) Profit
Answer: (c) Capital
In simple words: In accounting, capital can sometimes be adjusted based on bills payable. When money is owed (bills payable), it affects the overall capital of the business.

🎯 Exam Tip: While the question implies a direct transfer, the effect of bills payable, like other liabilities, is on the capital calculation, especially when moving between different accounts to determine missing figures.

 

Question 6. The amount of credit sales can be computed from
(a) Total debtors account
(b) Total creditors account
(c) Bills receivable account
(d) Bills payable account
Answer: (a) Total debtors account
In simple words: To find out how much was sold on credit, you look at the total debtors account. This account keeps track of all the money that customers still owe the business for goods or services bought on credit.

🎯 Exam Tip: Remember that the total debtors account is specifically used to determine credit sales, as it records all transactions with customers who have bought goods on credit.

 

Question 7. Which one of the following statements is not true in relation to incomplete records?
(c) It is suitable for all types of organisations
(d) Tax authorities do not accept
Answer: (c) It is suitable for all types of organisations
In simple words: Incomplete records are not good for all kinds of businesses. They are mainly used by very small businesses or sole traders who don't have to follow strict accounting rules. Larger companies need proper, complete records.

🎯 Exam Tip: Always keep in mind that the "single entry system" or "incomplete records" are generally unscientific and unsuitable for large, complex organizations or for situations requiring high accuracy for tax or other regulatory purposes.

 

Question 8. What is the amount of capital of the proprietor, if his assets Rs. 85,000 and Liabilities Rs 21,000.
(a) Rs. 85,000
(b) Rs. 1,06,000
(c) Rs. 21,000
(d) Rs. 64,000
Answer: (d) Rs. 64,000
In simple words: To find the owner's capital, you simply take everything the business owns (assets) and subtract everything it owes (liabilities). In this case, Rs. 85,000 minus Rs. 21,000 gives you Rs. 64,000.

🎯 Exam Tip: Use the basic accounting equation: Capital = Assets - Liabilities. This formula is essential for calculating capital from a statement of affairs.

 

Question 9. When capital, in the beginning, is Rs. 10,000, drawings during the year is 6,000 profit made during the year is 2,000 and the additional capital introduced is 3,000, find out the amount of capital at the end.
(a) Rs. 9,000
(b) Rs. 11,000
(c) Rs. 21,000
(d) Rs. 3,000
Answer: (d) Rs. 3,000
In simple words: To calculate the capital at the end, start with the opening capital, add any new money invested and profits, then subtract any money the owner took out. This gives you the final amount of capital.

🎯 Exam Tip: Apply the formula: Closing Capital = Opening Capital + Additional Capital + Profit - Drawings. Ensure all components are correctly added or subtracted.

 

Question 10. Opening balance of debtors: Rs. 30,000, cash received: Rs. 1,00,000, credit sales: Rs. 90,000; closing balance of debtors is
(a) Rs. 30,000
(b) Rs. 1,30,000
(c) Rs. 40,000
(d) Rs. 20,000
Answer: (d) Rs. 20,000
In simple words: The closing balance for debtors is calculated by adding the opening balance and credit sales, then subtracting the cash received. This shows how much money is still owed by customers at the end of the period.

🎯 Exam Tip: Remember the basic structure of a Debtors Account: Opening Balance + Credit Sales - Cash Received - Closing Balance = 0. Use this to find any missing figure.

 

II. Very Short Answer Questions

 

Question 1. What is meant by incomplete records?
Answer: Incomplete records are accounting records that are not strictly maintained using the double-entry system. These records typically include full details for cash transactions and personal accounts of customers and creditors, while other accounts are only maintained as needed. This system is often used by small businesses due to its simplicity.
In simple words: Incomplete records are when a business does not fully follow the double-entry accounting method. They usually keep full records only for cash and personal accounts.

🎯 Exam Tip: Highlight that incomplete records lack systematic maintenance according to the full double-entry principle, focusing on cash and personal accounts only.

 

Question 2. State the accounts generally maintained by the small-sized sole trader when a double-entry accounting system is not followed.
Answer: When a small-sized sole trader does not follow a double-entry accounting system, they generally maintain a cash account and personal accounts for customers and creditors fully. Other accounts are typically maintained only if and when necessary. This selective recording makes the system simpler but less comprehensive.
In simple words: Small sole traders who don't use double-entry accounting mostly keep track of their cash and the personal accounts of people they buy from (creditors) and sell to (customers).

🎯 Exam Tip: For small businesses using incomplete records, emphasize that the core maintained accounts are cash and personal accounts of debtors and creditors.

 

Question 3. What is a statement of affairs?
Answer: A statement of affairs is a financial statement that shows the balances of a business's assets and liabilities on a specific date. Assets are listed on one side, and liabilities are listed on the other, similar to a balance sheet. The difference between the total assets and total liabilities is considered the capital. This statement helps to determine the financial position, especially when complete double-entry records are not kept.
\( \text{Capital} = \text{Assets} - \text{Liabilities} \)
In simple words: A statement of affairs is like a simple financial report that shows everything a business owns (assets) and owes (liabilities) on a particular day. The difference between these two tells you the owner's capital.

🎯 Exam Tip: Define a statement of affairs as a summary of assets and liabilities to find capital, especially useful under incomplete records. Mention its resemblance to a balance sheet.

 

III Short Answer Questions

 

Question 1. What are the features of incomplete records?
Answer: The features of incomplete records include:
1. Nature: This method of recording transactions is unscientific and unsystematic. It does not properly follow accounting principles and accounting standards.
2. Types of accounts maintained: Generally, only cash accounts and personal accounts are maintained in full. Real accounts (like for assets) and nominal accounts (like for expenses and income) are not maintained properly, and some transactions might be omitted.
3. Lack of uniformity: There is no consistent way of recording transactions across different organizations. Each business records transactions according to its own specific needs and conveniences, leading to varied formats.
4. Financial statements may not represent a true and fair view: Because the information is incomplete and records are inaccurate, the calculated profit or loss cannot be fully trusted. It might not accurately reflect the true profitability or financial position of the business.
5. Suitability: This system is only suitable for business concerns that do not have a legal obligation to maintain books of accounts under the double-entry system. It is commonly used by small-sized sole traders and partnership firms.
6. Mixing up of personal and business transactions: Often, the owner's personal transactions are mixed with the business transactions. For example, if goods are bought for the owner's personal use, they might be recorded alongside regular business purchases.
In simple words: Incomplete records are not scientific and don't follow all accounting rules. They usually only track cash and personal accounts fully, so the financial reports might not be entirely accurate. Small businesses often use them, but personal and business money can get mixed up.

🎯 Exam Tip: When describing features, categorize them into nature, types of accounts, uniformity, reliability of statements, suitability, and potential for mixing personal/business funds.

 

Question 2. What are the limitations of incomplete records?
Answer: The limitations of incomplete records are:
• Lack of proper maintenance of records: This system is unscientific and unsystematic. Real and nominal accounts are often not maintained accurately or fully, leading to gaps in information.
• Difficulty in preparing trial balance: Since not all accounts are fully maintained, it becomes difficult to prepare a trial balance. A trial balance is essential to check if the accounting records are arithmetically accurate.
• Difficulty in ascertaining true profitability of the business: Profit is determined based on available information and estimates, which may not be precise. Therefore, it is hard to find the actual profit because a proper trading and profit and loss account cannot be prepared with full accuracy.
In simple words: Incomplete records are not well-organized, making it hard to check for mistakes or find the real profit. Because not all information is kept, it is difficult to know exactly how well the business is doing.

🎯 Exam Tip: Focus on the lack of accuracy and reliability, especially regarding profit determination and the inability to prepare a trial balance, as primary limitations.

 

Question 3. State the differences between double-entry system and incomplete records.
Answer: The differences between the double-entry system and incomplete records are outlined in the table below:

In simple words: The double-entry system records every transaction twice (debit and credit) and keeps all types of accounts fully, making it easy to check for errors. Incomplete records don't do this for all transactions or accounts, so it's harder to check accuracy.

🎯 Exam Tip: Focus on the comprehensiveness of recording, the types of accounts maintained, and the ability to prepare a trial balance as key differentiating factors.

 

Question 4. State the procedure for calculating profit or loss through the statement of affairs.
Answer: To calculate profit or loss using the statement of affairs method, follow these steps:
1. Determine the opening capital by preparing an opening statement of affairs.
2. Determine the closing capital by preparing a closing statement of affairs.
3. Adjust the closing capital by adding back any drawings made by the owner during the year and subtracting any additional capital introduced.
4. The profit or loss is the difference between this adjusted closing capital and the opening capital. If the adjusted closing capital is more than the opening capital, it is a profit; if less, it is a loss. This method provides an estimate of the financial performance when full records are not available.
Adjusting closing capital \( = \) Closing capital \( + \) Drawings \( - \) Additional capital.
Profit/Loss \( = \) Adjusted closing capital \( - \) Opening capital.
In simple words: To find profit or loss using this method, first figure out the capital at the start and end of the year. Adjust the ending capital by adding back money the owner took out and subtracting any new money they put in. Then, compare this adjusted amount to the starting capital to see if there's a profit or loss.

🎯 Exam Tip: Clearly outline the sequence: calculate opening capital, calculate closing capital, adjust closing capital for drawings and additional capital, then compare adjusted closing capital with opening capital to find profit or loss.

 

Question 5. Differentiate between the statement of affairs and the balance sheet.
Answer: The differences between a statement of affairs and a balance sheet are as follows:

In simple words: A statement of affairs is used to find capital when full records aren't kept, and it's less reliable because it uses some guesses. A balance sheet, however, is based on complete, accurate records from a double-entry system and gives a true picture of the business's financial health.

🎯 Exam Tip: Focus on the purpose (capital vs. financial position), the accounting system used (incomplete vs. double-entry), and the reliability as core distinctions.

 

Question 6. How is the amount of credit sale ascertained from incomplete records?
Answer: In a system of incomplete records, the amount of credit sales is determined by preparing a Total Debtors Account. This account helps to calculate the missing credit sales figure by using other available information related to debtors. Below is a specimen of the Total Debtors Account:

In simple words: To find credit sales when records are incomplete, you make a "Total Debtors Account". You put in what customers owed at the start, cash received from them, returns, and what they still owe at the end. The missing number that makes both sides equal is the credit sales.

🎯 Exam Tip: Illustrate the process by showing the Total Debtors Account format, emphasizing that credit sales are typically the balancing figure.

 

IV Exercise

 

Question 1. From the following particulars ascertain profit or loss:
Answer:

**Statement of Profit or Loss for the year ended 31.03.2019**Profit: Rs. 3,00,000
In simple words: To find the profit, we take the capital at the end of the year, add back any money the owner took out, and subtract any extra money the owner put in. Then, we compare this adjusted amount to the capital at the start of the year. If the adjusted amount is higher, it means the business made a profit.

🎯 Exam Tip: Follow the precise steps: Closing Capital + Drawings - Additional Capital = Adjusted Closing Capital. Then, Adjusted Closing Capital - Opening Capital = Profit/Loss. Make sure to use the correct signs for each adjustment.

 

Question 2. From the following particulars ascertain profit or loss :
Answer:

**Statement of Profit or Loss for the year ended 31.12.2018**Loss: Rs. 30,000
In simple words: We calculate the profit or loss by adjusting the closing capital for drawings and additional capital, and then comparing it to the opening capital. In this case, because the adjusted closing capital is less than the opening capital, the business incurred a loss.

🎯 Exam Tip: Remember that if the Adjusted Closing Capital is less than the Opening Capital, it indicates a Loss, not a Profit. Pay close attention to the order of operations.

 

Question 3. From the following details, calculate the missing figure.
Answer:

**Calculation of Opening Capital**Opening capital: Rs. 90,000
In simple words: To find the missing opening capital, we work backward from the closing capital. We add drawings and subtract additional capital to get the adjusted closing capital. Since there was a loss, we add the loss to the adjusted closing capital to find the original opening capital.

🎯 Exam Tip: When a loss is incurred, the formula for finding opening capital is: Adjusted Closing Capital + Loss = Opening Capital. Remember to reverse the usual profit calculation logic.

 

Question 4. From the following details, calculate the capital as on 31st December 2018.
Answer:

**Calculation of Closing Capital**Closing Capital: Rs. 1,45,000
In simple words: To find the capital at the end of the year, start with the capital at the beginning. Add any extra money the owner put in and the profit earned. Then, subtract any money or goods the owner took out for personal use. This gives the final capital amount.

🎯 Exam Tip: The closing capital is calculated by adjusting the opening capital for additional investments, drawings (including goods withdrawn), and the net profit or loss for the period.

 

Question 5. From the following details, calculate the missing figure.

Answer:

Solution:

Calculation of drawings

Drawings: Rs 5,000. To find the missing drawings figure, we reverse the profit calculation. We start with the closing capital, add the drawings, subtract additional capital, then subtract opening capital, and the result should be the profit. By setting the profit as 8,000, we can work backward to find the drawings. The drawings for the year were Rs 5,000, which is the balancing figure that makes the equation true.
In simple words: We can find out how much money was taken out of the business by working backwards from the profit made. If the final profit is known, and all other capital changes are known, we can calculate the drawings.

🎯 Exam Tip: When a missing figure needs to be calculated, always use the relevant formula and substitute known values to solve for the unknown, working backwards if necessary.

 

Question 6. Following are the balance in th books of thomas as on 31st March 2019. Prepare a statement of affairs as on 31st March 2019 and calculate capitals as at that date.

Answer:

Solution:

Statement of affairs as on 31.3.2019

Capital: Rs 2,80,000. The statement of affairs is like a balance sheet, listing assets and liabilities on a specific date. The difference between the total assets and total liabilities shows the capital of the business at that time. This helps to understand the financial health of the business.
In simple words: We make a list of everything the business owns (assets) and everything it owes (liabilities). The money left over is the capital.

🎯 Exam Tip: Always remember that the capital is the balancing figure in a Statement of Affairs, representing the owner's equity in the business.

 

Question 7. On 1st April 2018 Subha started her business with a capital of ₹ 1,20,000. She did not maintain a proper book of accounts. Following particulars are available from her books as on 31.03.2019.

During the year she withdraw ₹ 30,000 for her personal use. She introduced further capital of 40,000 during the year. Calculate her profile or loss.
Answer:

Solution:

Statement of affairs as on 31.03.2019

Statement of profit or Loss for year ending 31st March 2019

Closing Capital: Rs 2,80,000; Profit: Rs 2,90,000. We calculated the closing capital by listing all assets and liabilities. Then, we found the profit by comparing this adjusted closing capital with the initial capital, accounting for any extra money put in or taken out during the year. This helps us see how much the business has grown. A business's profit is the increase in its adjusted capital over a period, after accounting for owner contributions and withdrawals.
In simple words: We added what the owner took out and subtracted what they put in, then compared the final capital with the starting capital to find the profit.

🎯 Exam Tip: Always remember the formula for calculating profit from incomplete records: Adjusted Closing Capital - Opening Capital = Profit/Loss, where Adjusted Closing Capital = Closing Capital + Drawings - Additional Capital.

 

Question 8. Raju does not keep proper books of accounts. The following details are taken from his records.

During the year he introduced further capital of 50,000 and withdraw ₹ 2,500 per month from the business for his personal use. Prepare a statement of profit or loss with the above information.
Answer:

Solution:

Statement of affairs as on 1.1.2018

Statement of Affairs As on 31.12.2018

Statement of Profit / Loss for the year ended 31.12.2018

Opening Capital: Rs 2,50,000; Closing capital: Rs 3,00,000; Profit: Rs 30,000. To find the profit or loss, we first determine the capital at the beginning and end of the year by preparing statements of affairs. We then adjust the closing capital for any drawings or additional capital contributions. The comparison of this adjusted closing capital with the opening capital reveals the profit or loss. This method helps estimate profit even when full accounting records are not kept.
In simple words: We calculate capital at the start and end of the year. Then, we adjust the end capital for extra money put in or taken out. The difference tells us the profit or loss.

🎯 Exam Tip: Remember to calculate total drawings for the year (monthly drawings x 12) and include any additional capital introduced when preparing the statement of profit or loss.

 

Question 9. Ananth does not keep his books under the double-entry system. Find the profit or loss made by him for the year ending 31st March 2019.

Ananth had withdrawn ₹ 60,000 for his personal use. He had introduced ₹ 17,000 as capital for expansion of his business. Create a provision of 5% on debtors. Plant and machinery is to be depreciated at 10%.
Answer:

Solution:

Statement of Affairs As on 31.3.2018

Statement of Affairs As on 31.03.2019

Statement of profit or loss for the year ended 31.03.2019

Opening Capital: Rs 1,93,000; Closing capital: Rs 1,57,000; Profit: Rs 7,000. We first find the capital at the start and end of the year by preparing statements of affairs, including adjustments for depreciation and provision for doubtful debts. Then, we calculate the profit by adjusting the closing capital for drawings and additional capital, and comparing it to the opening capital. This provides a clear picture of the business's performance for the period.
In simple words: We calculate capital at the start and end, considering changes like money taken out, money put in, and reductions for assets losing value or possible bad debts. The difference tells us the profit.

🎯 Exam Tip: Remember to apply all adjustments (depreciation, provision for doubtful debts) when calculating capital for the Statement of Affairs, as these affect the true value of assets.

 

Question 10. Find out credit sales from the following information.

Answer:

Solution:

Dr. Total Debtors A/c Cr.

Total sales = Credit Sales + Cash Sales = 5,40,000 + 4,60,000
Total Sales = Rs. 10,00,000
Credit sales: Rs 5,40,000; Total Sales: Rs 10,00,000. To find credit sales, we use the total debtors account. We add the opening balance of debtors and credit sales on the debit side, and cash received, discount allowed, returns inward, and closing balance of debtors on the credit side. The balancing figure on the debit side is the credit sales. Cash sales, if provided, are added to credit sales to get total sales. This helps in understanding the total revenue from sales.
In simple words: We track all money owed by customers at the start, plus new sales, and subtract payments, discounts, returns, and money still owed at the end. What's left over is the new sales made on credit. Then, we add cash sales to get all sales.

🎯 Exam Tip: When using the Total Debtors Account, ensure all relevant items like opening/closing debtors, cash received, discounts, and returns are included to accurately find the balancing figure for credit sales.

 

Question 11. From the following details find out total sales made during the year.

Answer:

Solution:

Dr. Total Debtors A/c Cr.

Total sales = Credit Sales + Cash Sales = 5,40,000 + 4,60,000
Total Sales = Rs. 10,00,000
Credit sales: Rs 5,40,000; Total Sales: Rs 10,00,000. To calculate total sales, we first find the credit sales using the Total Debtors Account. The balancing figure in this account represents the credit sales for the period. Once credit sales are determined, we add the cash sales (provided separately) to get the total sales. This helps in understanding the complete sales revenue generated by the business.
In simple words: First, we figure out how much customers bought on credit by looking at what they owed and paid. Then, we add the sales made in cash to find the total sales for the whole year.

🎯 Exam Tip: Always distinguish between credit sales and cash sales. Credit sales are calculated through the Total Debtors Account, while cash sales are usually given separately or can be found from a cash book.

 

Question 12. From the following particulars, prepare bills receivable account and compute the bills received from the debtors.

Answer:

Solution:

Dr. Bills receivable A/c Cr.

B/R received: Rs 4,80,000. To prepare a Bills Receivable Account, we list the opening balance of bills receivable on the debit side. Then, on the credit side, we record bills received, bills dishonored, and the closing balance. The balancing figure for "Bills received from debtors" (To Sales (Credit Bal Fig)) is then calculated. This helps in understanding the flow of bills and collections from customers.
In simple words: We list the bills customers owe us at the start and end. We also note if any bills were not paid. Then, we can figure out how many new bills were received or honored during the year.

🎯 Exam Tip: The Bills Receivable Account helps determine either the total bills received during the year or the total credit sales, depending on which is the missing figure.

 

Question 13. From the following particulars, calculate total sales. Prepare a statement of affairs on 31st March 2019 and calculate capitals as at that date.

Answer:

Solution:

Dr. Bills receivable A/c Cr.

Dr. Bills receivable A/c Cr.

Total sales = Credit Sales + Cash Sales = 9,85,000 + 3,15,000
Total Sales = Rs. 13,00,000
B/R received: Rs 2,05,000; Credit sales: Rs 9,85,000; Total sales: Rs 13,00,000; Capital: Rs 2,80,000. To find the total sales, we first prepare a Bills Receivable Account to determine the bills received from debtors. Next, we prepare a Total Debtors Account to calculate the credit sales. Finally, we add the credit sales and cash sales to get the total sales. We also prepare a Statement of Affairs to find the capital at the end of the period. This comprehensive approach helps in getting all necessary financial figures from incomplete records.
In simple words: We list bills received from customers and then calculate sales made on credit. We add this to cash sales to get total sales. We also make a list of assets and debts to find the total capital.

🎯 Exam Tip: When multiple figures are missing, systematically prepare each required account (Bills Receivable, Total Debtors) to find the intermediate balancing figures before calculating the final required values like total sales or capital.

 

Question 14. From the following details, calculate credit purchases.

Answer:

Solution:

Dr. Total creditors A/c Cr.

Credit purchases: Rs 4,90,000. To calculate credit purchases, we prepare a Total Creditors Account. On the debit side, we record opening creditors, cash paid to creditors, and purchase returns. On the credit side, we record closing creditors. The balancing figure represents the credit purchases for the period. This helps us understand the total value of goods bought on credit from suppliers.
In simple words: We figure out how much we bought on credit by looking at how much we owed to suppliers at the start, how much we paid them, and how much we still owe at the end.

🎯 Exam Tip: The Total Creditors Account is essential for finding credit purchases when complete records are unavailable, with the balancing figure representing the purchases made on credit.

 

Question 15. From the following particulars calculate total purchases.

Answer:

Solution:

Dr. Bills Payable A/c Cr.

Dr. Total Cr's A/c Cr.

Total Purchase = Cr Purchase + Cash Purchase = 1,55,000 + 2,25,000
Total Purchase = Rs. 3,80,000
B/P accepted: Rs 25,000; Credit purchases: Rs 1,55,000; Total Purchases: Rs 3,80,000. To calculate total purchases, we first prepare a Bills Payable Account to find the bills accepted during the year. Next, we prepare a Total Creditors Account to determine the credit purchases. Finally, we add the credit purchases and cash purchases (provided separately) to arrive at the total purchases. This ensures all purchases, both cash and credit, are accounted for.
In simple words: We calculate how many bills we agreed to pay and how much we bought on credit. Then, we add the cash purchases to find out all the goods bought for the business.

🎯 Exam Tip: Remember that total purchases are the sum of both cash purchases and credit purchases. Credit purchases are determined using the Total Creditors Account, while Bills Payable Account helps find bills accepted.

 

Question 16. From the following details you are required to calculate credit sales and credit purchases by preparing total debtors account, total creditors account, bills receivable account and bills payable account.

Answer:

Solution:

Dr. Bills Receivable A/c Cr.

Bills Payable A/c

Total Dr's A/c

Total Cr's A/c

B/R received: Rs 42,000; Credit sales: Rs 6,59,000; B/P accepted: Rs 40,000; Credit Purchases: Rs 4,00,000. To find credit sales and credit purchases, we systematically prepare four key accounts: Bills Receivable Account, Bills Payable Account, Total Debtors Account, and Total Creditors Account. Each account uses specific transactions and opening/closing balances to find the missing figures as balancing amounts. This approach allows for a comprehensive reconstruction of credit transactions from incomplete records.
In simple words: We create special records for money customers owe us (bills receivable and debtors) and money we owe suppliers (bills payable and creditors). By putting in all known information, we can then figure out how much was sold on credit and how much was bought on credit.

🎯 Exam Tip: Always prepare the Bills Receivable and Bills Payable accounts first to get the figures needed for the Total Debtors and Total Creditors accounts, respectively.

 

Question 17. From the following details of Rakesh, prepare Trading and Profit and Loss account for the year ended 31st March, 2019 and a Balance Sheet as on that date.
Answer:

To prepare the final accounts, we first need to gather all opening and closing balances, along with other transaction details for the year. The key financial statements - Trading and Profit and Loss Account and Balance Sheet - are then prepared using this information to show the business's performance and financial position. Understanding these statements helps in assessing the business's health.

Other details:

Solution:

Dr. Total Dr's A/c Cr.

Dr. Total Cr's A/c Cr.

Trading and Profit & Loss A/c for the year ended 31.03.2019

Balance Sheet as on 31.03.2019

In simple words: This question shows how to make the main financial reports for a business that does not keep full records. It uses details about money received and paid, and how much assets and debts the business has at the start and end of the year to figure out how well the business did.

🎯 Exam Tip: When preparing financial statements from incomplete records, it's crucial to first calculate missing figures like credit sales or purchases using memorandum accounts before drafting the final statements.

 

Question 18. Mary does not keep her books under double entry system. From the following details prepare trading and profit and loss account for the year ending 31st March, 2019 and a balance sheet as on that date.
Answer:

To accurately determine the financial performance and position of a business that maintains incomplete records, it is necessary to compile the Cash Book and various financial statements. This helps in identifying all transactions and balances needed to prepare the Trading and Profit and Loss Account and the Balance Sheet.

Cash Book:

Additional information:
- Credit purchases: Rs. 1,80,000
- Credit sales: Rs. 2,90,000
- Opening capital: Rs. 2,80,000
- Depreciate furniture and fittings by 10% p.a.

Solution:

Dr. Total Drs A/c Cr.

Trading & Profit & Loss A/c for the yr ended 31.03.2019

Balance Sheet as on 31.03.2019

In simple words: This solution demonstrates how to prepare financial statements from incomplete accounting records. It involves carefully tracking cash transactions, credit sales, purchases, and other expenses to build a complete picture of profit and loss, and assets and liabilities.

🎯 Exam Tip: When given incomplete records, always start by constructing missing accounts (like Total Debtors A/c or Total Creditors A/c) and the Cash Book to find essential figures before preparing the final Trading, Profit & Loss A/c, and Balance Sheet.

 

Question 19. Ananth carries on hardware business and does not keep his books on double entry basis The following particulars have been extracted from his books.
Answer:

When a business uses incomplete records, preparing comprehensive financial statements requires careful reconstruction of accounts. This involves using available opening and closing balances, cash transactions, and other information to determine missing figures, calculate profit or loss, and present the final financial position.

Other information for the year ending 31.12.2018:

Total sales during the year were Rs. 7,70,000. Purchases returns were Rs. 30,000 and sales returns were Rs. 25,000. Depreciate land and building by 5%. Provide Rs. 1,500 for doubtful debts.

Solution:

Dr. Total Cr's A/c Cr.

Statement of Affairs As on 01.01.2018

Trading & Profit & Loss A/c for the Year ended 31.12.2018

B/s As on 31.12.2018

In simple words: This problem shows how to convert incomplete business records into full financial statements. It involves calculating credit purchases, gross profit, and net profit by adding all relevant financial activities, and then presenting the overall financial health in a balance sheet.

🎯 Exam Tip: Remember to account for all adjustments, such as depreciation and provisions for doubtful debts, when converting incomplete records to ensure accuracy in the final financial statements.

 

Question 20. Selvam does not keep ; books under double entry system. From the following information prepare trading and Profit and loss A/c and Balance Sheet as on 31- 12-2018
Answer:

To prepare accurate financial statements from incomplete records, we must first determine the opening capital by preparing a Statement of Affairs. Then, the Trading and Profit and Loss Account and the Balance Sheet are prepared, incorporating all cash transactions, credit activities, and necessary adjustments like depreciation and provisions for doubtful debts.

Adjustments: Write off depreciation of 10% on machinery. Create a reserve of 1% on debtors for doubtful debts.

Solution:

Statement of Affairs as on 01.01.2018

Trading & Profit & Loss A/c for the year ended 31.12.2018

B/s As on 31.12.2018

In simple words: This solution demonstrates how to prepare financial statements from incomplete business records. It involves calculating all transactions, adjusting for depreciation and bad debts, to determine the final profit and loss and the financial position of the business.

🎯 Exam Tip: When dealing with incomplete records, ensure all adjustments like depreciation, provision for doubtful debts, and interest on capital/drawings are correctly applied to calculate true profit and present an accurate balance sheet.

 

12th Accountancy Guide Accounts From Incomplete Records Additional Important Questions And Answers

I. Choose The Best Answer

 

Question 1. Companies must maintain accounting records under double entry system as per
(a) Sec. 128 (1) of Indian Companies Act, 1956
(b) Sec. 128 (1) of Indian Companies Act, 2000
(c) Sec. 128 (1) of Indian Companies Act, 2013
Answer: (b) Sec. 128 (1) of Indian Companies Act, 2000
In simple words: Indian company law specifies that companies must use the double-entry system for their accounting. This ensures all financial transactions are recorded completely and accurately.

🎯 Exam Tip: Remember the specific section and year of the Companies Act when quoting legal requirements for accounting standards.

 

Question 2. Single entry system is an ...........system of bookkeeping.
(a) incomplete
(b) inefficient
(c) adequate
Answer: (a) incomplete
In simple words: The single entry system is called "incomplete" because it does not record all parts of a transaction like the double entry system does.

🎯 Exam Tip: Understand that "incomplete" refers to the partial recording of financial transactions, not necessarily a lack of records altogether.

 

Question 3. Single entry system maintains only ........... and cash accounts
(a) Real
(b) Personal
(c) Nominal
Answer: (b) Personal
In simple words: In a single entry system, records are mainly kept for cash transactions and for people or businesses (personal accounts) that money is owed to or from.

🎯 Exam Tip: Remember that personal and cash accounts are the primary focus in a single entry system, making it less comprehensive than double-entry.

 

Question 4. Single entry system does maintain ........... and ........... accounts
(a) Assets & liabilities
(b) Debtors, Creditors
(c) Real, Nominal
Answer: (c) Real, Nominal
In simple words: Even though the single entry system does not keep full details for every account, it still involves some recording of real accounts (like assets) and nominal accounts (like expenses and incomes), just not in a systematic way.

🎯 Exam Tip: While single entry system primarily focuses on personal and cash accounts, remember that real and nominal accounts are also implicitly present or partially recorded, even if not maintained systematically.

 

Question 5. Single entry system is not based on ........... aspect concept
(a) Double Entry
(b) Dual
(c) Single
Answer: (b) Dual
In simple words: The single entry system does not follow the "dual aspect concept," which means that for every transaction, there are two effects recorded. This is different from the double-entry system.

🎯 Exam Tip: The dual aspect concept is a fundamental principle of double-entry bookkeeping; its absence is a defining characteristic of the single-entry system.

 

Question 6. Incomplete records are those records which are not kept under.
(a) Single Entry
(b) Double Entry
(c) None of the options
Answer: (b) Double Entry
In simple words: Incomplete records happen when a business does not follow the full rules of the double-entry accounting system, where every transaction affects two accounts.

🎯 Exam Tip: Distinguish between "incomplete records" (lack of double-entry) and "single entry system" (a specific, partial bookkeeping method).

 

Question 7. Credit purchases can be ascertained as a balancing figure in the ...........
Answer: (a) Total Creditors A/c
In simple words: To find out how much goods were bought on credit, we look at the Total Creditors Account. The missing amount that makes the account balance is usually the credit purchases.

🎯 Exam Tip: Remember that credit purchases are identified in the Total Creditors Account, while credit sales are found in the Total Debtors Account.

 

Question 8. To know total purchases and total sales under single entry system, one has to depend on
(a) Trading A/c
(b) Copies of invoice and Vouchers
(c) Profit & Loss A/c
Answer: (b) Copies of invoice and Vouchers
In simple words: Because a single entry system doesn't have complete books, you need to check original papers like invoices and receipts to find out the total amount of buying and selling.

🎯 Exam Tip: In a single entry system, source documents are vital for reconstructing financial data since proper ledgers are not maintained for all transactions.

 

Question 9. Under single entry system, the arithmetical accuracy of ........... cannot be checked.
(a) Trial Balance
(b) Trading Balance
(c) Balance Sheet
Answer: (a) Trial Balance
In simple words: Since the single entry system does not record both sides of every transaction, it is not possible to prepare a Trial Balance to check if the math in the accounts is correct.

🎯 Exam Tip: The inability to prepare a Trial Balance is a major drawback of the single-entry system, as it means mathematical accuracy cannot be verified easily.

 

Question 10. If the adjusted closing capital is more than the opening capital, it is ...........
(a) Loss
(b) Profit
(c) Asset
Answer: (b) Profit
In simple words: When the money left in the business at the end (adjusted closing capital) is more than what it started with (opening capital), it means the business has made a profit.

🎯 Exam Tip: Remember the basic formula: Profit = Adjusted Closing Capital - Opening Capital. An increase indicates profit, while a decrease indicates loss.

 

Question 11. If the adjusted closing capital is less than the opening capital, it is.................
(a) Loss
(b) Profit
(c) Asset
Answer: (a) Loss
In simple words: If the money left in the business at the end (adjusted closing capital) is less than what it started with (opening capital), it means the business has suffered a loss.

🎯 Exam Tip: A decrease in adjusted closing capital relative to opening capital directly signifies a loss incurred during the accounting period.

 

Question 12. Statement of Affairs resembles a...
(a) Balance Sheet
(b) Trading A/c
(c) Profit A/c Loss A/c
Answer: (a) Balance Sheet
In simple words: A Statement of Affairs looks very similar to a Balance Sheet because it lists assets and liabilities on a specific date, just like a balance sheet does, to find out the capital.

🎯 Exam Tip: The Statement of Affairs is used to ascertain capital in businesses with incomplete records, acting as a substitute for a Balance Sheet.

 

Question 13. Profit under ........... Entry system is only an estimate
(a) Double
(b) Single
(c) Income
Answer: (b) Single
In simple words: The profit calculated using the single entry system is often just an estimate because not all transactions are fully recorded, making the exact profit difficult to know.

🎯 Exam Tip: The estimated nature of profit is a key limitation of the single-entry system due to its incomplete recording of transactions.

 

Question 14. The total assets of a proprietor is Rs. 5,00,000. His liabilities are Rs.3,50,000 His capital in the business is
(a) Rs. 1,50,000
(b) Rs. 8,50,000
(c) Rs. 3,50,000
Answer: (a) Rs. 1,50,000
Hint:
Assets = Liabilities + Capital
Capital = Assets - Liabilities
Capital = 5,00,000 - 3,50,000
Capital = 1,50,000
In simple words: To find the capital, you subtract the total amount of money the business owes to others (liabilities) from the total value of everything the business owns (assets). This leftover amount is the owner's capital.

🎯 Exam Tip: Always remember the fundamental accounting equation: Assets = Liabilities + Capital. This formula is crucial for calculating any missing component when two are given.

 

Question 15. Statement of affairs method is also called
(a) Conversion method
(b) Net worth method
(c) Adjusted closing capital method
Answer: (b) Net worth method
In simple words: The Statement of Affairs method is also known as the net worth method because it helps calculate the net value of the business by comparing assets and liabilities.

🎯 Exam Tip: The "Net Worth Method" and "Statement of Affairs Method" are often used interchangeably when determining capital from incomplete records.

 

II Short Answer Questions

 

Question 16. Define single Entry System
Answer: According to Kohler, the Single Entry System is a way of keeping books where typically only records for cash and personal accounts are maintained. It is essentially an incomplete form of double-entry bookkeeping, and how much it varies depends on the specific situation of the business.
In simple words: Single Entry System is a simple way of keeping records where you mostly track cash and money owed to or by people, but it's not a complete accounting system like double-entry.

🎯 Exam Tip: When defining "Single Entry System," highlight its focus on cash and personal accounts and its nature as an incomplete form of double-entry for full marks.

 

Question 17. What is conversion method?
Answer: The conversion method is used when a business wants to calculate its profit from a single-entry system by preparing a complete Trading and Profit and Loss Account. This process involves converting the incomplete records into a full double-entry system format to achieve a more accurate financial picture.
In simple words: The conversion method is a way to turn simple, incomplete business records into a full financial report, like a Trading and Profit and Loss Account, to find out the real profit.

🎯 Exam Tip: The core idea of the conversion method is to transform incomplete single-entry records into a more comprehensive double-entry format to accurately determine profit and loss.

 

Question 1. Find out profit or loss from the following information

Answer: To find the profit or loss, we adjust the closing capital. We add back drawings to the closing capital and subtract any additional capital introduced. Then, we compare this adjusted capital with the opening capital to determine the profit or loss. In this case, the profit for the year is Rs. 1,60,000. It is important to consider all these adjustments to get an accurate financial picture.

In simple words: We start with the money left at the end (closing capital). Then we add back any money taken out by the owner (drawings) and take away any extra money the owner put in (additional capital). If this new amount is more than what was started with (opening capital), it's a profit; if less, it's a loss.

🎯 Exam Tip: Remember the formula for calculating profit or loss: (Closing Capital + Drawings - Additional Capital) - Opening Capital. This helps structure your answer clearly.

 

Question 2. Calculate the missing information from the following.

Answer: To find the missing capital at the end, we work backward from the profit. We add the profit to the opening capital, then add the additional capital, and finally subtract the drawings to arrive at the closing capital. This shows how capital changes over time due to business activities and owner contributions/withdrawals. The capital at the end is Rs. 16,000.

In simple words: We know the profit, the starting money, extra money put in, and money taken out. We can figure out the ending money by working backward: start with the profit, then add the opening capital, add any new capital, and take away what the owner used for themselves.

🎯 Exam Tip: When calculating a missing figure like closing capital, always use the profit/loss statement logic in reverse, starting from the known profit or loss and adjusting backward.

 

Question 3. Mr. Suresh Strated business with Rs. 2,00,000 on 1st April 2003. His books are kept under single entry. On 31st March, 2004 his position was as under:

Answer: To find the profit or loss for Mr. Suresh, we first need to determine his closing capital. We do this by preparing a Statement of Affairs, which lists all assets and liabilities at the end of the year. The difference between total assets and total liabilities gives us the closing capital. After that, we compare this closing capital with his initial capital, adjusting for any drawings or additional capital. For Mr. Suresh, his closing capital is Rs. 2,48,500, and since his opening capital was Rs. 2,00,000, he made a profit of Rs. 48,500.

In simple words: First, list all the assets (things the business owns) and liabilities (money the business owes) at the end of the year. The leftover amount, after subtracting liabilities from assets, is the closing capital. If this closing capital is more than the starting capital, the business made a profit.

🎯 Exam Tip: When preparing a Statement of Affairs, ensure all assets are on one side and liabilities on the other. The balancing figure represents capital, crucial for profit/loss calculation.

 

Question 4. Prakash keeps his books by 'Single Entry System His position on 01.04.2003 and 31.03.2004 was as follows.

He introduced an additional capital of Rs. 8,000 during the financial year. He withdraw Rs. 14,000 for domestic purpose. Find out the profit for the year ended 31.03.2004.
Answer: To determine Prakash's profit or loss, we first calculate his opening and closing capital using Statements of Affairs. The opening capital is found from the assets and liabilities at the start, and the closing capital from those at the end. After finding these, we adjust the closing capital for drawings and additional capital to find the actual profit or loss. Prakash's profit for the year is Rs. 23,500.

i) Calculation of opening capital:

Statement of Affairs As on 31.3.04

Statement of Profit or Loss for the period ended 31.03.2004

In simple words: First, calculate the starting and ending capital by listing all assets and liabilities. Then, to the ending capital, add back any money the owner took out for themselves. Subtract any extra money the owner put in. Compare this final adjusted ending capital to the starting capital; the difference is the profit or loss.

🎯 Exam Tip: Remember to separately calculate opening and closing capital using the Statement of Affairs before compiling the final profit/loss statement. This structured approach prevents errors.

 

Question 5. Mrs. Vanitha keeps her books on singly entry basis. Find out the profit or loss made for the period ending 31.03.2004.

Mrs. Vanitha had withdrawn Rs. 10,000 for her personal use and had introduced fresh capital of Rs. 4,000. A provision of 5% on debtors is necessary. Write off depreciation of plant at 10% and furniture at 15%.
Answer: To find Mrs. Vanitha's profit or loss, we start by calculating her opening and closing capital using the Statement of Affairs for both dates. We must also account for depreciation on plant and furniture, and create a provision for doubtful debts at the end of the year. Once both capital figures are found, we adjust the closing capital for drawings and additional capital to arrive at the profit or loss. Mrs. Vanitha's profit for the year is Rs. 7,320.

i) Calculation of opening capital:

ii) Calculation of closing capital:

Statement of Profit or Loss for the period ended 31.03.2004

In simple words: First, list all assets and liabilities at the start and end of the year to find the initial and final capital. Remember to calculate any depreciation or special provisions. Then, adjust the final capital by adding back money taken out by the owner and subtracting any new money they put in. The difference between this adjusted final capital and the initial capital is the profit or loss.

🎯 Exam Tip: Always make sure to include all adjustments like depreciation and provisions for doubtful debts when calculating closing capital in a Statement of Affairs for accuracy.

 

Question 6. Ram and Laxman are equal partners in a business in which the books are kept by single entry. On 01.04.2004 their position was as under:

On 31.3.2005 their position was a under.

Plant & Machinery and furniture are to be depreciated by 10%.
Drawing: Ram 30,000
Laxman 25,000
Ascertain the profit for the year ended 31.03.2005.
Answer: To find the profit or loss for Ram and Laxman, we need to calculate their closing capital by preparing a Statement of Affairs for 31.03.2005. We must include depreciation for Plant & Machinery and furniture. After calculating the total closing capital, we adjust it for both partners' drawings. Finally, we compare this adjusted closing capital with their initial opening capital to determine the profit for the year. The total profit for the year is Rs. 25,500.

Solution: Calculation of closing capital:

Statement of profit or loss for the year ended 31.03.2005

In simple words: First, list all the assets and liabilities at the end of the year and subtract the liabilities from the assets to find the total closing capital. Then, add back any money the partners took out. Compare this total with the money they started with; the difference is the profit for the year. Remember to account for depreciation on fixed assets.

🎯 Exam Tip: When dealing with partners, ensure drawings are added back to the *combined* closing capital before comparing it with the combined opening capital. Depreciation must be calculated on the book value of assets.

 

Question 7. Find out total purchases and total sales from the following details by making necessary accounts:

Answer: To find the total purchases and sales, we prepare a Total Debtors Account to find credit sales and a Total Creditors Account to find credit purchases. We use the opening and closing balances, cash received/paid, and returns/discounts to balance these accounts. Once credit sales and purchases are known, we add them to the cash sales and cash purchases, respectively, to get the total sales and total purchases for the period. Total Purchases are Rs. 36,500, and Total Sales are Rs. 3,20,000.

Solution: i) Calculation of Credit sales:

ii) Calculation of Credit Purchases

Total Purchases = Cash Purchases + Credit Purchases
= Rs. 12,000 + Rs. 24,500
= Rs. 36,500
Total Sales = Cash Sales + Credit Sales
= Rs. 24,000 + Rs. 2,96,000
= Rs. 3,20,000In simple words: To find the total amount of buying and selling, we first figure out the credit sales by looking at customer accounts and credit purchases by looking at supplier accounts. Then, we add these credit amounts to the cash sales and cash purchases to get the overall totals.

🎯 Exam Tip: Remember that "return inwards" reduces debtors, and "return outwards" reduces creditors. Always verify that total debits equal total credits in each account.

 

Question 8. Mr. James commenced business on 1.04.2004 with a Capital of Rs. 75,000. he immediately bought furniture for Rs. 12,000. During the year, he borrowed Rs. 15,000 from his wife as loan. He has withdrawn Rs. 21,600 for his family expenses. From the following particulars you are required to prepare Trading and Profit & Loss A/c and Balance Sheet as on 31.03.2005

Provide 10% depreciation on furnitures
Answer: To prepare the Trading and Profit & Loss Account and Balance Sheet for Mr. James, we first calculate his credit sales and credit purchases by making a Total Debtors Account and a Total Creditors Account. Then, we use all the given information, including the opening capital, cash transactions, and closing balances, along with adjustments for depreciation, to create the final accounts. The financial statements provide a clear picture of his business performance and financial position. Mr. James's net profit for the year is Rs. 46,300, and his Balance Sheet total is Rs. 1,64,700.

Solution: i) Calculation of Credit sales:

ii) Calculation of Credit Purchases

Trading and Profit and Loss Account of Mr. James for the year ended 31.03.2005

Balance Sheet of Mr. James as on 31.03.2005

In simple words: First, calculate how much customers owe (debtors) and how much is owed to suppliers (creditors) by making their accounts. Then, list all income and expenses to find the profit or loss. Finally, create a summary of all assets and liabilities to show the company's financial position at the end of the year.

🎯 Exam Tip: When preparing final accounts from incomplete records, ensure all necessary adjustments like depreciation, cash transactions, and credit figures are accurately calculated and posted to the respective accounts to derive correct profits and balances.

 

Question 9. Mrs. Malathy maintained her account books on single entry system. On 01.04.2003 her Capital was Rs. 2,50,000. Additional Information:

 

Question 9. Mrs. Malathy maintained her account books on single entry system. On 01.04.2003 her Capital was Rs. 2,50,000. Additional Information:

 

Answer:
Here are the calculations for credit sales, credit purchases, and the final Trading and Profit and Loss Account and Balance Sheet for Mrs. Malathy's business.
(i) Calculation of credit sales:

(ii) Calculation of Credit Purchases:
Trading and Profit and Loss Account of Mrs. Malathy for the ended 31.03.2004:
Balance Sheet as on 31.03.2004:In simple words: This solution shows how Mrs. Malathy's business performed. It calculates credit sales and purchases, then uses them to create a Trading and Profit and Loss Account to find the net profit. Finally, a Balance Sheet displays the company's financial position at the end of the year, showing all assets and liabilities.

🎯 Exam Tip: When preparing financial statements from incomplete records, ensure you calculate all missing figures (like credit sales or purchases) using their respective accounts before compiling the final P&L and Balance Sheet. Also, remember that Capital is calculated as Assets minus Liabilities.

 

Question 10. From the following details, prepare Trading and Profit & Loss account for the period ended 31.03.2004 and a Balance sheet on that date.

Additional Information:

Other Details:

Answer:
Here are the calculations for opening capital, credit sales, credit purchases, and the final Trading and Profit and Loss Account, along with the Balance Sheet.
(i) Calculation of Opening capital:

(ii) Calculation of Credit Sales:
(iii) Calculation of Credit Purchases:
Trading and profit and Loss Account for the year ended 31.03.2004:In simple words: This solution helps find the company's financial results. First, we calculate the starting capital. Then, we figure out how much was sold on credit and bought on credit using separate accounts. Finally, all these numbers are put together to show the company's profit and its financial health on the Balance Sheet.

🎯 Exam Tip: Remember to use the closing balances of assets and liabilities to prepare the final Balance Sheet, and ensure that the net profit or loss from the P&L account is correctly transferred to the capital account in the Balance Sheet to balance the totals.