# GSEB Solutions Class 11 Accounts Part 2 Chapter 10 Accounts from Incomplete Records

Gujarat Board GSEB Textbook Solutions Class 11 Commerce Accounts Part 2 Chapter 10 Accounts from Incomplete Records Textbook Exercise Questions and Answers.

## Gujarat Board Textbook Solutions Class 11 Accounts Part 2 Chapter 10 Accounts from Incomplete Records

### GSEB Class 11 Accounts Accounts from Incomplete Records Text Book Questions and Answers

Question 1.
Write the correct option from those given below each question :

1. Normally who uses single entry accounting methods ?
(b) Small retailers
(c) Public companies
(d) Government companies
(b) Small retailers

2. Which statement is to be prepared to find out opening capital in single entry system ?
(b) Statement of affairs
(c) Statement of profit-loss
(d) Statement of stock
(b) Statement of affairs

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.
(d) only one effect for some transactions and two effects of remaining transactions.

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
(b) Statement of affairs

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
(b) Accounts from incomplete records

Question 2.
Answer the following questions in one or two sentences :

(1) What is Single Entry System ?
As a rule, the system of recording transactions relating to cash and personal accounts only is called Single Entry System.

(2) How does single entry system differ from double entry system?
Single entry system differs from double entry system in the following manner :

 Single entry system Double entry system 1. Every transaction does not have two effects. Every transaction has two effects. 2. Only personal accounts are maintained in the ledger. All accounts are maintained in the ledger. 3. Trial balance and Balance sheet cannot be prepared. Trial balance and Balance sheet can be prepared.

(3) What is Statement of Affairs ?
This statement is like a Balance sheet, on left side liabilities and payables are shown and assets and receivables are shown on the right side.

(4) Which capitals are compared in capital comparision method?
Closing capital is compared with opening capital in capital comparision method.

(5) Which items are added or which items are deducted from closing capital in statement showing profit or loss ?
Cash withdrawn, goods withdrawn and personal expenses paid from the business are added in closing capital while opening capital and additional capital are deducted from closing capital in statement showing profit or loss.

Question 3.
Answer the following questions in detail :

(1) What is Single Entry System ? Give the characteristics of Single Entry System.
Meaning: Small traders like hawkers, sole traders, small shopkeepers do not want to maintain all books of accounts. As per requirement, they keep only cashbook and ledger and record transactions relating to cash and personal accounts only. In this system double effect may not be given to each transaction of business. As per requirement, only one effect is given to some transactions, hence it is known as 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: Single entry system is an incomplete method of accounting. Under this system, some transactions may have two effects, while some have one effect only, e.g., (l)Cash received from customer (debtor). In this transactions, two effects are given, one effect is in cashbook and second effect is in customer’s A/c. (2) Purchased furniture by cash. In this transaction, only payment of cash effect is given in cashbook, while second effect is not given in furniture A/c, because of this system Real accounts and Nominal accounts are not maintained.

* For Extra Knowledge.
Characteristics of Single Entry System:

1. Incomplete records: As a rule, only cash transactions and personal accounts transactions are recorded. It is an incomplete method of accounting.
2. Mixture of Single Entry and Double Entry System: Most of the transactions are recorded with one effect whereas others are recorded with double effect and several transactions are not recorded.
3. Books as per requirement: Small traders keep a few books of accounts like cashbook and ledger as per their requirement.
4. Only personal accounts : Only personal accounts are maintained in the ledger.
5. Small retailers : Generally small traders like hawkers, small shopkeepers, street-venders, small retailers, etc. prepare accounts under this system.
6. Records : Complete accounting records are not maintained.
7. Uniformity : There is no uniformity in this systems for keeping books of accounts by traders.
8. Annual accounts : Trial balance and Balance sheet can’t be prepared under this system.
9. Entry for internal transactions: In this method, there is no effect (or entry) for internal transactions of business, e.g., Depreciation on assets, Interest on capital, etc.

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

• Limited object: This method is very useful for small traders like hawkers, small retailers or street-venders because their utility to prepare the accounts is limited.
• Time and Expense : In this method, books of account are prepared by small traders with less expense and less time, because all accounts are not prepared.
• Limited books : Small traders keep the books as per their business requirement. Normally they prepare only personal accounts. So, it requires limited books.

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

1. Importance only to personal accounts : In this system, importance are given only to personal accounts. Impersonal accounts are not opened in the ledger. So, it is not possible to get information of all accounts.

2. Trial balance can’t be prepared: As dual effect of all transactions are not recorded, trial balance can’t be prepared. Hence, it is not possible to check the arithmetical accuracy of the accounts.

3. Profit or Loss can’t be ascertained: As nominal accounts are not prepared, it is not possible to know the profit or loss at the end of the year.

4. Financial position can’t be obtained : In this method as assets accounts are not kept and trial balance is also not prepared. Hence, it is not possible to prepare final accounts, therefore it is also not possible to know the true and fair financial position of the business.

5. Statistical information can’t be obtained: As two fold effects of all transactions are not recorded, it is not possible to obtain statistical information.

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

7. Possibilities of frauds: In this system, it is not possible to check the arithmetical accuracy of the accounts, hence there are more possibilities of errors, manipulation in accounts, frauds, etc.

8. Comparison is not possible: Due to insufficient record of information, comparison of accounts with previous years are not possible in this system.

9. Difficulties : Due to inadequate information, difficulties arise in taking decisions in determining purchase price, taking a loan or insurance, etc.

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

(5) What is Statement of Affairs ? Give specimen to explain.
Meaning: A statement showing the estimated balances of various assets and liabilities of a business on a particular date is called ‘Statement of Affairs.’

Explanation : Under this system capital of the proprietor is ascertained by preparing statement of affairs. This statement is like a Balance sheet, on left side liabilities are shown and assets and receivables are shown on the right side.

The difference between total of assets side and the total of 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 : Under this system profit earned or loss sustained in the business in any accounting year can be ascertained by comparing capital at the end of the accounting year with the capital at the beginning of the same accounting year. In single entry system capital account is not maintained. Hence, to find out opening and closing capital of the business on a particular date, statement of affairs is prepared.

Specimen: The specimen of statement of affairs is as under :

Forming : Statement of Affairs is like a Balance sheet, on left side liabilities other than capital are shown and Assets and Receivables are shown on the right side. After having deduction of all liabilities (excluding capital) from the total of assets side, the arised difference is known as capital.

By showing opening balances of assets, receivables and liabilities in opening statement of affairs, the arised difference is known as opening capital. Similarly by showing closing balances of assets, receivables and liabilities in closing statement of affairs, the arised difference is known as closing capital.

Here amount of assets, receivables and liabilities can be ascertained from accounts maintained and if the accounts are not maintained, then their valuation can be considered.

Summary: Statement of affairs is prepared by balances and estimated values from incomplete records. From this statement, true and fair view of economical condition of a business cannot be found.

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

(7) Discuss in detail how to determine profit or loss in capital comparision method.
Method of capital comparison is used to find out the profit or loss amount in the Single entry system. In this method, opening capital and closing capital are compared, therefore it is known as comparison of capital method.

Steps : Following steps are to be followed for ascertainment of profit or loss and also for the preparation of Balance Sheet by capita comparison method :

1. First of all prepare opening statement of affairs to find out opening capital.
2. Prepare closing statement of affairs to find out closing capital.
3. Prepare statement showing profit or loss as per specimen given as under to find out net profit or loss with adjustments.
4. At the end, prepare Balance sheet after considering the adjustments.

The specimen statement given as under can be used to find out profit or loss :

→ Single entry system is an incomplete method of accounting. Therefore, sufficient information cannot be obtained from this method. Nominal account are not maintained. Therefore Profit and Loss A/c cannot be prepared. So opening capital and closing capital are compared to find out the profit and loss.

→ If closing capital is more than opening capital, the difference is treated as profit.
∴ Profit = Closing capital – Opening capital

→ If closing capital is less than opening capital, the difference is treated as loss.
∴ Loss = Opening capital – Closing capital

→ In this method, total amount withdrawn during the year is to be added in the closing capital and amount of additional capital is to be subtracted from the closing capital. Afterwards both capital balances are compared to find out profit or loss.

Note: If result is positive, it is considered as profit and if result is negative, it is treated as 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 :

 Particulars 1 – 4 – ’15 Amount ₹ 31 – 3 -’16 Amount ₹ Building 84,000 84,000 Machinery 50,400 58,800 Furniture 10,800 10,800 Investments 4,000 4,000 Stock 25,200 30,400 Debtors 24,000 36,000 Creditors 16,200 33,000 Cash and Bank balance 14,400 22,500 Bills payable 18,000 20,700 Bills receivable 8,400 10,700

During the year her cash withdrawal was ₹ 13,200 and goods withdrawal was ₹ 4,200. She had brought ₹ 12,000 as additional capital in the business.
Prepare a statement showing profit or loss for the year ended 31 – 3 – ’16.

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 :

 Particulars 1 – 4 – ’15 Amount ₹ 31 – 3 -’16 Amount ₹ Land-Building 13,000 25,000 Machinery 9,000 11,000 Furniture 1,500 2,500 Investments 2,500 3,000 Debtors 6,250 8,250 Bills payable 600 750 Creditors 7,500 9,000 Bills receivable 1,600 1,200 Stock 4,000 5,000 Cash and Bank balance 4,000 3,000 Loan from bank 5,000 5,000 Provident fund 2,000 2,500

During the year, she had brought her personal scooter worth ₹ 11,000 in the business and she had withdrawn ₹ 1,750 by cash. Her personal LIC premium of ₹ 3,500 and income tax of ₹ 4,100 are paid from business, while goods of ₹ 1,400 were taken away from business for her personal use.

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

 Particulars Dt. 31- 3 – ’15 Amount ₹ 31 – 3 -’16 Amount ₹ Machinery 18,000 18,000 Furniture 3,600 3,600 Cash balance 6,000 4,800 Bank balance 8,000 10,500 Debtors 64,000 56,000 Stock 38,500 36,000 Bad debts reserve 4,500 – Creditors 52,000 48,000 Outstanding salary 3,600 4,800

Sureshbhai has withdrawn ₹ 300 every month. He brought ₹ 6,000 as additional capital during the year. Provide depreciation on machinery and furniture at 10 %. Provide bad debts reserve on debtors at 5 %.

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

During the year he had brought his personal furniture worth ₹ 4,400 in business and he had withdrawn ₹ 1,100 per month. His LIC premium of ₹ 2,200 and income tax of ₹ 4,400 were paid from the business. Provide 5 % bad debts reserve on debtors. Calculate depreciation on building and furniture of ₹ 2,400 and ₹ 1,000 respectively.
From the above information, prepare a statement showing profit /loss for the period ending 31 – 3 – ’17.

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

 Particulars 1 – 4 – ’15 Amount ₹ 31 – 3 -’16 Amount ₹ Land-Building 1,40,000 1,40,000 Furniture 30,000 45,000 Computer – 24,000 Stock 36,000 21,000 Cash balance 11,000 14,000 Bank balance 58,000 32,000 Debtors 23,000 32,000 Creditors 24,000 21,000 Outstanding salary 4,500 5,400 Prepaid insurance 2,100 3,000

His cash withdrawals were ₹ 6,000 as on 1 – 7 – ’15 and ₹ 4,000 on 1 – 10 – ’15. On 1 – 9 – ’15, he brought personal furniture worth ₹ 15,000, personal computer worth ₹ 24,000 and cash of ₹ 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% p.a. on capital 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.

Explanation :
(1) Depreciation on Land-Building at 10% on ₹ 1,40,000 for 1 year
= Depreciation ₹ 1,40,000 × $$\frac{10}{100}$$ × 1 = ₹ 14,000

(2) Depreciation on opening balance of furniture at 10% on ₹ 30,000 for 1 year
= ₹ 30,000 × $$\frac{10}{100}$$ × 1 = ₹ 3,000
7 month’s depreciation on personal furniture brought in as on 1 – 9 – ’15
= ₹ 15,000 × $$\frac{10}{100}$$ × $$\frac{7}{12}$$ = ₹ 875
∴ Total depreciation on furniture = ₹ 3,000 + ₹ 875 = ₹ 3,875

(3) 7 month’s depreciation on personal computer brought in as on 1 – 9 – ’15 at 20% on ₹ 24,000
= ₹ 24,000 × $$\frac{20}{100}$$ × $$\frac{7}{12}$$ = ₹ 2,800

(4) Interest on capital at 10% :
On opening balance of ₹ 2,71,600 for 1 year = ₹ 2,71,600 $$\frac{10}{100}$$× 1
= ₹ 27,160
+ 7 month’s interest on additional capital brought in as on 1 – 9 – ‘15 on ₹ 60,000
= ₹ 60,000 × $$\frac{10}{100}$$ × $$\frac{7}{12}$$ = ₹ 3,500
∴ Total interest on capital = ( ₹ 27,160 + ₹ 3,500) = ₹ 30,660

(5) 5% Bad debts reserve on debtors = ₹ 32,000 × $$\frac{5}{100}$$ = ₹ 1,600

(6) Interest in drawings at 8 % :