Problem3

Mrs. P has not kept proper books of account. From the balances obtained,
prepare Statement of profit or Loss for the year 2018-19 and Statement of
affairs as on that date.

Particulars 1-4-2018 31-3-2019

Bank overdraft 225000 200000
Furniture 23000 23000
Land & Building 265000 265000
Debtors 151000 149000
Creditors 193000 186000
Stock 296750 311000
Cash 26750 27000
Bills Receivable 212000 204000
Bills Payable 310000 290000
During the year he withdrew ₹30000 for personal use.
Adjustments:
i) Maintain provision for Doubtful debts at2. 5% on debtors
ii) Depreciate Land and Building by 2% and Furniture at 10%.
[May/June 2018, Code no. 3527/CBCS/E (12 b)]

Solution
Calculation of Opening capital
Statement of affairs as on 1-4-2018 (opening values)

Liabilities ₹ assets ₹
Bank overdraft 225000 Cash 26750
Creditors 193000 Bills Receivable 212000
Bills Payable 310000 Debtors 151000
Stock 296750
Capital (balancing figure) 246500 Furniture 23000
Land and Buildings 265000

974500 974500
Calculation of Closing capital

Statement of affairs as on 31-3-2019 (Closing values)

Liabilities ₹ assets ₹
Bank overdraft 200000 Cash 27000
Creditors 186000 Bills Receivable 204000
Bills Payable 290000 Debtors 149000
Stock 311000
Capital (balancing figure) 303000 Furniture 23000
Land and Buildings 265000

979000 979000

Calculation of Profit or Loss for the year 31-3-2019

Statement showing profit or loss of Mrs. P

for the year ended 31-3-2019

Particulars Amount
(₹)
Capital at the end of the year (31-3-2019) 303000
Add: Drawings during the year 30000
333000
Less: Further capital introduced for the year nil
Adjusted capital (as on 31-3-2019) 333000
Less: Capital at the beginning of the year (1-4-2018) 246500
Profit Subjected to Adjustments
86500
Adjustments:
Less: Provision for Doubtful debts (149000*2.5%) 3725
Depreciation on Land & Buildings (265000*2%) 5300
Depreciation on Furniture (23000*10/100) 2300
11325
-------
Net Profit for the year ended 31-3-2019 (Net Profit) 75175
Problem4

A trader keeps his books on single entry system. His financial position.

particulars 31-3-2014 31-3-2015

Cash in hand 40000 30000
Bank overdraft 6000 10000
Stock in trade 30000 47000
Bills Receivable 20000 40000
Bills Payable 10000 10000
Sundry Debtors 41000 43000
Furniture 30000 30000
Plant 200000 300000
Total drawings during the year amount ₹15000. He introduced further
capital of ₹60000during the year. Depreciate all fixed assets at 10% p.a.
Ascertain the result of business preparing the required statement.
(May/June 2017, Code no. 8027/E)

Solution
Calculation of Opening capital
Statement of affairs as on 31-3-2014 (opening values)

Liabilities ₹ assets ₹
Bank overdraft 6000 Cash in hand 40000
Bills Payable 10000 Bills Receivable 20000
Sundry Debtors 41000
Stock in trade 30000
Capital (Balance figure) 345000 Furniture 30000
Plant 200000

361000 361000
Calculation of Closing capital

Statement of affairs as on 31-3-2015 (Closing values)

Liabilities ₹ assets ₹
Bank overdraft 10000 Cash in hand 30000
Bills Payable 10000 Bills Receivable 40000
Sundry Debtors 43000
Stock in trade 47000
Capital (balancing figure) 470000 Furniture 30000
Plant 300000

490000 490000

Calculation of Profit or Loss for the year 31-3-2015

Statement showing profit or loss of A trader

for the year ended 31-3-2015

Particulars Amount
(₹)
Capital at the end of the year (31-3-2015) 470000
Add: Drawings during the year 15000
485000
Less: Further capital introduced for the year 60000
Adjusted capital (as on 31-3-2015) 425000
Less: Capital at the beginning of the year (1-4-2014) 345000
Profit Subjected to Adjustments
80000
Adjustments:
Less: Depreciation on Furniture (30000X10/100) 3000
Depreciation on Plant (as per working notes) 25000
28000
----------

Net Profit for the year ended 31-3-2015 (Net Profit) 52000
Working notes:
Depreciation on Plant = ₹200000X10/100 = ₹20000 (opening value complete year)
During the year plant increased by ₹100000 (i.e., 300000-200000) Depreciation
calculation is average of 6 months is considered on ₹100000.

Depreciation = ₹100000 X 10/100 X 6/12 = ₹5000.

Total depreciation on Plant = ₹20000+₹5000 = ₹25000

Date: 13/04/2019 FA (I/II)

Problem 5
The following is the Statement of Affairs as at 31st March 2005 of
Young and Bell. Who are in partnership sharing Profits and Losses in
proportions of 2/3rd and 1/3rd respectively. From the particulars
given below prepare as at 31st March 2006 (a) a statement of profit,
apportioning the balance between Young and Bell and (b) a
statement of Affairs as at that date.
Young and Bell
Statement of affairs as at 31st March 2005

Liabilities ₹ Assets ₹
Capital Accounts: Plant and Machinery 4000
Young Freehold Property 12000
20000 Furniture and Fittings 1000
Bell 28000 Stock 7000
8000 Sundry Debtors 13000
------ Bills Receivable 3000
---- Bank 990
Bills Payable 1000 Cash 10
Sundry Creditors 12000

41000 41000
The position as at 31st March 2006 was as follows:-
Cash at Bank ₹1500; Cash in hand ₹100; Sundry Creditors ₹19000;
Bills payable ₹1200; Sundry Debtors ₹5000; Bills Receivable
₹3800. The stock on hand amounted to ₹8400. Young’s drawings
during the year had been ₹3000 and Bell had drawn ₹1200. Young
withdrew the sum of ₹4000 on 30th September 2005 from his
Capital Account. Depreciate Machinery and Plant by 5%, Furniture
and Fittings by 10% and allow interest on Partners Capital at the
rate of 5% p.a. Ignore interest on Drawings.

Solution 5
Calculation of Closing Capital
Young and Bell
Statement of affairs as at 31st March 2006

Liabilities ₹ Assets ₹
Combined Capital Plant and Machinery 4000
(Balance amount) 15300 dep@5% 200 3800
(Young and Bell) Freehold Property 12000
Furniture and Fittings 1000
Bills Payable 1200 Dep@10% 100 900
Sundry Creditors 19000
Stock 8400
Sundry Debtors 5000
Bills Receivable 3800
Bank 1500
Cash 100
35500 35500
Calculation of Profit or Loss for the year 31st March 2006

Statement of profit or loss of Young and Bell

for the year ended 31st March 2006
Particulars Amount
(₹)
Combined Capital at the end of the year (31-3-2006) 15300
Add: Drawings during the year (Young ₹3000 and Bell ₹1200) 4200
Adjusted capital (as on 31-3-2006) 19500
Less: Capital at the beginning of the year (31-3-2005) 24000
(Young ₹20000-4000 = 16000 and Bell ₹8000 = ₹24000)
Profit Subjected to Adjustments -4500
Adjustments:
Less: Interest on Capital (as per working notes) -1300
Net Loss for the year ended 31-3-2015 (Net Loss)
- 5800
Distribution of Loss
Young = ₹5800 X 2/3 = ₹3867

Bell = ₹5800 X 1/3 = ₹1933

Working Notes:

Calculation of Interest on Capital @5% p.a.

Young opening capital of ₹20000, but he has withdrawn ₹4000 on 30th

September 2005. So his Capital employed in the business complete year
₹16000 (i.e., ₹20000-₹4000 = ₹16000) and his investment in the Business
₹4000 for 6 months only (i.e., from 1st April 2005 to 30th September 2005).

Bell Capital ₹8000 complete year interest should be considered.

Young interest on capital

Interest = ₹16000 X 5/100 =₹800 for complete year and

Interest for 6 months on ₹4000 = ₹4000 X 5/100 X 6/12 = ₹100.

Young interest on capital = ₹800 + ₹100 = ₹900

Bell interest on capital

Interest = ₹8000 X 5/100 = ₹400

₹Total Interest = ₹900 + ₹400 = ₹1300.

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Assignment
Problem (I)
Mr. Pavan has not kept proper books of account. From the balances obtained,
prepare Statement of profit or Loss for the year 2019-20 and Statement of
affairs as on that date.
Particulars 1-4-2019 31-3-2020
Bank overdraft 450000 400000
Furniture 46000 46000
Land & Building 530000 530000
Debtors 302000 298000
Creditors 386000 372000
Stock 593500 622000
Cash 53500 54000
Bills Receivable 424000 408000
Bills Payable 620000 580000
During the year he withdrew ₹60000 for personal use.
Adjustments:
i) Maintain provision for Doubtful debts at2. 5% on debtors
ii) Depreciate Land and Building by 2% and Furniture at 10%.
(Ans: Opening Capital ₹493000; Closing Capital ₹606000; Profit ₹150350)
Problem (II)
Tharun Kumar keeps his books on single entry system. You are required to
ascertain profit or loss made by him in the year 2019 from the following.

particulars 31-12-2018 31-12-2019

Stock in trade 26000 68000
Sundry Creditors 25600 16000
Sundry Debtors 33600 36000
Cash in hand 1600 1200
Bank overdraft 25600 40000
Furniture 12000 12000
Motor van 160000 160000
Plant 400000 400000
Total drawings during the year amounted to ₹144000. During the year he has
introduced further capital of ₹120000. Depreciate furniture at 10%, plant at
20% and Motor van ₹20000.
Prepare the statement of affairs and calculate profit for the year
(Ans: Opening Capital ₹582000; Closing Capital ₹520000; Loss ₹38000)

Problem (III)
Mr. Anand keeps his books on single entry system. His financial position.

particulars 31-3-2019 31-3-2020

Cash in hand 4000 3000
Bank overdraft 600 1000
Stock in trade 3000 4700
Bills Receivable 2000 4000
Bills Payable 1000 1000
Sundry Debtors 4100 4300
Furniture 3000 3000
Plant 20000 30000
Total drawings during the year amount ₹1500. He introduced further capital
of ₹6000during the year. Depreciate all fixed assets at 10% p.a.
Ascertain the result of business preparing the required statement.
(Ans: Opening Capital ₹34500; Closing Capital ₹47000; Profit ₹5200)
Conversion Method or Final Accounts Method

Under the statement of affairs method profit or loss of a business concern is

ascertained without preparing trading and profit and loss Account.
Conversion Method means converting accounts from single entry to double
entry method. Under Conversion Method Profit and Loss Account and Balance
sheet can be prepared from incomplete books of accounts by making certain
adjustments and preparing some accounts. All necessary books and accounts
should be opened and all transactions should be recorded in the books
following double entry principles.
The following steps may be followed for conversion:

 If capital at the beginning is not given, it is to be ascertained by

preparing opening statement of affairs.

 Cash book should be prepared which will help in the ascertainment of

opening or closing Cash and Bank balances.

 Total Debtors Account and Bills Receivable Account, should be prepared

to ascertain the missing information regarding Credit Sales, closing
balance of Debtors.

 Total Creditors Account and Bills Payable Account, should be prepared

to ascertain the missing information regarding Credit Purchases, closing
balance of Creditors.

 Prepare Stock Account to ascertain the missing information.

 Prepare Fixed Assets Account to ascertain the missing information such

as opening/closing balance, purchase/sale of fixed assets and
Depreciation etc.,

 Prepare Trial Balance to check the arithmetical accuracy.

  Prepare Trading and Profit and Loss Account and the Balance Sheet.

Dr Total Debtors Account Cr

Particulars Amount Particulars Amount

To Balance b/d ***** By Cash or Bank a/c *****
(opening balance) (Amt. received from Drs)

To Credit Sales ***** By B/R Received ****

To B/R Dishonored ***** By Sales Return or (RI) ****

By Discount allowed ****

By Bad Debts ****

By Balance c/d ****

(closing balance)
***** *****

Dr Bills Receivable Account Cr

Particulars Amount Particulars Amount

To Balance b/d ***** By Cash Account *****
(opening balance) (B/R Collected)
To Total Debtors a/c ***** By Total Debtors a/c ****
(B/R Received) (B/R Dishonored)
By Balance c/d
(closing balance) ****
 ***** *****

Dr Total Creditors Account Cr

Particulars Amount Particulars Amount

To Cash or Bank a/c ***** By Balance b/d *****
(Amt. paid to Crs.) (opening balance)
To B/P Accepted ***** By Credit Purchases ****
To Discount Received *****
To Purchase Returns **** By B/P Dishonored ****
To Balance c/d *****
(closing balance)

***** *****

Dr Bill Payable Account Cr

Particulars Amount Particulars Amount

To Cash Account ***** By Balance b/d *****
(B/P honored) (opening balance)
To Total Creditors a/c ***** By Total Creditors a/c ****
(B/P Dishonored) (B/P Accepted)
To Balance c/d *****
(closing balance)

***** *****
Hints for tracing Missing Information

Missing Information Hints for Tracing

1. Cash Sales Cash & Bank Account Summary
Total Sales – Net Credit Sales
2. Net Credit Sales Prepare Total Debtors Account
Total Sales – Cash Sales – Sales Returns
3. Net Sales Cash Sales + Credit Sales – Sales Returns
Cost of Goods Sold + Gross Profit
Gross Profit X 100/Rate of Gross Profit on Sales

4. Cost of Goods Sold Opening Stock + Purchases + Direct Expenses -

Closing Stock.
(Direct Expenses = carriage/ cartage/Freight
Inward etc.,)
Net Sales – Gross Profit
Stock Account

5. Gross Profit Net Sales x Rate of Gross Profit/100

Net Sales – Cost of Goods Sold
6. Cash Purchases Cash & Bank Account Summary
Total Purchases – Net Credit Purchases
7. Net Credit Purchases Prepare Total Creditors Account
Total Purchases – Cash Purchases – P. Returns
8.Net Purchases Cash Purchases + Credit Purchases – P. Returns
Cost of Goods Sold + Closing Stock – Opening
Stock
9. Drawings/operating Cash and Bank Account Summary
Expenses paid/Loan
Repayment/Additional
Capital Introduced/Loans
raised/Income Received
10. Cash and Bank Balance Cash and Bank Account Summary
Cash stolen by Cashier
11. Opening Capital Opening Balance Sheet
12. Opening and Closing Prepare the Account of Respective Item
Balance of any other item
Problem 1
From the following particulars, find out the credit Sales and Credit Purchases
for the year ended 31st March, 2018
₹
Total Debtors on April 1 2017
st 14750
Total Creditors on April 1 2017
st 8970
Cash received during the year from Sundry Debtors 157450
Discounts allowed during the year 580
Bad debts written off 850
Returns inwards 1150
Bills received from Customers 9600
Cash paid to Sundry Creditors 129780
Discount received from them 430
Returns to Suppliers 520
Bills issued to them 6400
Total Debtors on March 31 2018 st 13890
Total Creditors on March 31 2018 st 9450

Solution 1
Dr. Total Debtors Account Cr

Particulars Amount Particulars Amount

To Balance b/d 14750 By Cash Account 157450
(opening balance) (Amt. received from Drs)

To Credit Sales 168770 By B/R Received 9600

(Balance Amount)
By Return Inwards (SR) 1150

By Discount allowed 580

By Bad Debts 850

By Balance c/d 13890

(closing balance)
183520 183520
Dr Total Creditors Account Cr

Particulars Amount Particulars Amount

To Cash Account 129780 By Balance b/d 8970
(Amt. paid to Crs.) (opening balance)
To B/P Accepted 6400 By Credit Purchases 137610
To Discount Received 430 (Balance Amount)
To Purchase Returns 520
To Balance c/d 9450
(closing balance)

146580 146580

Problem 2
From the following figures drawn from the books of a trader, who maintains
his accounts as per Single Entry System, you are required to calculate Total
Sales.

₹
Bills receivable in the beginning of the year 7800
Debtors in the beginning of the year 30800
Bills receivable en-cashed during the year 20900
Cash received from Debtors 70000
Bad debts written off 2800
Returns inwards 8700
Bills receivable dishonored 1800
Bills Receivable at the end of the year 6000
Debtors at the end of the year 25500
Cash Sales as per Cash Book 40900
Solution 2

Dr. Bills Receivable Account Cr

Particulars Amount Particulars Amount

To Balance b/d 7800 By Bank Account 20900
(opening balance) (B/R Collected)
To Total Debtors a/c By Total Debtors a/c 1800
(B/R Received) 20900 (B/R Dishonored)
(Balance Amount) By Balance c/d
(closing balance) 6000

28700 28700

Dr. Total Debtors Account Cr

Particulars Amount Particulars Amount

To Balance b/d 30800 By Cash Account 70000
(opening balance) (Amt. received from Drs)
To Bills Receivable 1800
( Dishonoured) By B/R Received 20900
To Credit Sales 95300 (B/R Account)
(Balance Amount) By Return Inwards (SR) 8700

By Bad Debts 2800

By Balance c/d 25500

(closing balance)
127900 127900

Statement of Total Sales

₹
Credit Sales (as per Total Debtors Account) 95300
Cash Sales as per Cash Book 40900
 Total Sales 136200

Assignment
Problem (I)
From the following particulars, find out the credit Sales and credit Purchases
for the year ended 31st March, 2019
₹
Total Debtors on April 1 2018
st 22125
Total Creditors on April 1st 2018 13455
Cash received during the year from Sundry Debtors 236175
Discounts allowed during the year 870
Bad debts written off 1275
Returns inwards 1725
Bills received from Customers 14400
Cash paid to Sundry Creditors 194670
Discount received from them 645
Returns to Suppliers 780
Bills issued to them 9600
Total Debtors on March 31st 2019 20835
Total Creditors on March 31st 2019 14175
(Ans: Credit Sales ₹253155 and Credit Purchases ₹206415)