CA Inter Accounts | Preparation of Accounts from Incomplete Records 19.

PREPARATION OF ACCOUNTS FROM INCOMPLETE

RECORDS
Q. No. R1 R2 R3 Special Point
Class Work
1 ICAI - Illu.3
2 ICAI - Illu.4
3 ICAI Illu.5
4 ICAI Illu.8
5 ICAI Illu.10
6 ICAI Practical Question 1
7 ICAI Practical Question 2
8 ICAI – Illu.1
9 ICAI – Illu.2
10 ICAI – Illu.6
11 ICAI – Illu.7
12 ICAI – Illu.9
13 ICAI Practical Question 3
ADDITIONAL QUESTIONS FOR SELF PRACTICE
1 Additional Question
2 Additional Question

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CA Inter Accounts | Preparation of Accounts from Incomplete Records 19.7

1. INTRODUCTION
Very often the small sole proprietorship and partnership business do not maintain books of
accounts on double entry systems. The small business concerns, according to their convenience
maintain record only of cash transactions and credit transactions. They do not maintain record
of many transactions. Such incomplete accounting records create special problems while
ascertaining business results and financial position at the end of the year. The term ‘single
entry system’ is popularly used to describe the finalisation of accounts from
incomplete records. In fact there’s no such system as single entry system.

2. FEATURES OF SINGLE ENTRY SYSTEM

It is a mixture of

Double Entry Single Entry No Entry

Both the Aspects of One aspect of Not recorded at all

transactions are recorded transaction is recorded

• Cash received from • Cash paid to acquire • Depreciation on fixed

customers the fixed assets assets
• Cash paid to suppliers • Bad debits

3. ASCERTAINMENT OF PROFIT
Ascertainment of Profit

Net worth method or statement Conversion method or final

of affairs accounts method

4. STATEMENT OF AFFAIRS METHOD

Profit or Loss for accounting period is ascertained by
❖ Comparing the capital at the beginning of the accounting period with that at the end of
the accounting period

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❖ The opening and closing capital is ascertained by preparing the statement of affairs
at the opening and closing accounting period
Following two statements are prepared

Statement affairs at the opening and Statement of Profit and Loss

closing accounting period

Format of Statement of Affairs

Statement of Affairs ...........As at.........
Liabilities Rs Assets Rs.
Sundry Creditors xxx Cash in Hand xxx
Bills payable xxx Cash at Bank xxx
Outstanding Expenses xxx Sundry Debtors xxx
Bank Overdraft xxx Less Provision xxx xxx
Secured loan xxx Bills Receivable xxx
Unsecured loan xxx Stock in transit xxx
Capital (Balancing Figure) xxx Prepaid Expenses xxx
Investment xxx
Fixed Asset xxx
Less Depreciation xxx xxx
xxx xxx
Format of Statement of Profit
Statement of Profit for the Year Ended…..
Particulars Details
Closing Capital xxx
Add Drawing During the year xxx
xxx
Less Opening Capital xxx
Capital introduced during the year xxx xxx
Profit or loss for the year xxx
Notes:
❖ All the fixed assets are adequately depreciated.
❖ All the outstanding expenses and prepaid expenses etc. are recognised.

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CA Inter Accounts | Preparation of Accounts from Incomplete Records 19.9

❖ Valuation of inventories and investments are correctly done.

Concept Question No. 1

The Statement of Affairs of Sri S. Roy as on 1st April, 2007 is given below:
Liabilities Rs Assets Rs
Sundry Creditors 16,500 Cash 7,450
Accrued expenses 3,500 Sundry Debtors 25,350
Capital 50,000 Stock 30,300
Furniture 6,900
70,000 70,000
During the year ended 31st March, 2008 his drawings amounted to Rs 15,000. He also withdrew
goods worth Rs 600 for his personal use. On 1st July, 2007, S. Roy transferred some of his household
furniture to the business at a value of Rs 2,100. His assets and liabilities as on 31st March, 2008
were:
Liabilities Rs Assets Rs
Sundry Creditors 18,600 Cash 6,580
Accrued expenses 4,300 Sundry Debtors 36,900
Stock 40,320
Furniture 9,000
Prepaid Rent 400
Furniture is to be depreciated @ 10% p.a. and a provision is to be created on debtors @ 5%,
Interest 5% to be allowed on capital as at the beginning of the year. Ascertain the profit or loss
for the year ended 31st March, 2008 and prepare the Statement of Affairs as on that date.

5. CONVERSION METHOD
Considering the system followed by proprietor on the basis of available data - Single entry
transaction will be converted into double entry
Following A/c’s have to be prepared

Optional Compulsory

Cash A/c + Bank A/c Trading A/c

Debtors A/c + Bill Receivable A/c Profit & Loss A/c
Creditors A/c + Bill Payable A/c Balance Sheet
Opening Balance Sheet
Fixed Assets
Expenses A/c

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Debtors A/c
Dr. Cr.
Particulars Rs. Particulars Rs.
To Balance b/d xxx By Sales Returns A/c xxx
To Bills Receivable A/c (B/R Dishonoured ) xxx By Cash A/c (cash received) xxx
To Bank a/c (Discounted B/R Dishonoured ) xxx By Bank A/c (cheques received) xxx
To Bank A/c (Cheque Dishonoured ) xxx By bills Receivable A/c (B/R drawn) xxx
To Creditors A/c (Endorsed B/R Dishonoured) xxx By Discount Allowed A/c xxx
To Credit sales xxx By Bad Debts A/c xxx
By Balance c/d xxx

Bills Receivable Account

Dr. Cr.
Particulars Rs. Particulars Rs.
To Balance b/d xxx By Cash A/c (Bills Receivable xxx
Collected)
To Sundry Debtors A/c (Bills Receivable xxx By Bank A/c (Bills Receivable xxx
Received) Discounted)
By Discount on Bills A/c xxx
(Discounting charged)
By Sundry Debtors A/c (Bills xxx
Receivable Dishonoured)
By Sundry Creditors a/c (Bills xxx
Receivable Endorsed)
By Balance c/d xxx
xxx xxx
Creditors Account
Dr. Cr.
Particulars Rs. Particulars Rs.
To Purchase Returns A/c xxx By Balance b/d xxx
To Cash A/c (Cash paid) xxx By Bills Payable A/c (B/P xxx
Dishonoured/ cancelled )
To Bank a/c (Cheque issued) xxx By Bank A/c (Cheque xxx
Dishonoured)
To Bills payable a/c (B/P Accepted) xxx By Debtors A/c (Endorsed B/R xxx
Dishonoured)

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To Bills Receivable A/c (B/R Endorsed) xxx By Credit Purchases xxx

To Discount Received xxx
To Balance c/d xxx
xxx xxx
Bills Payable Account
Dr. Cr.
Particulars Rs. Particulars Rs.
To Cash/ Bank a/c (Bills Payable xxx By Balance b/d xxx
Discharged)
To Creditors A/c (Bills Payable xxx By Creditors A/c (bills Payable xxx
dishonoured/ cancelled ) accepted )
To Balance c/d xxx
xxx xxx

Concept Question No. 2

Find out the credit sales by preparing the Sundry Debtors A/c from the following
information;

Particulars Rs Particulars Rs
Sundry Debtors as at 1.1.2008 40,000 Cash received from Debtors 70,000
Sundry Debtors as at 31.12.2008 50,000 Cheque received from Debtors 80,000
Discount Allowed 5,000 B/R Dishonoured 9,000
Bad debts 7,000 B/R drawn 30,000
Bad debts recovered 4,000 Cheque dishonoured 11,000

Concept Question No. 3

Ascertain the Bills Receivable drawn from the following information.

Particulars Rs.
Bills receivable as on 1.1.2008 15,000
Bills receivable as on 31.12.2008 25,000
Bills collected 12,000
Bills receivable dishonoured 16,000
Bills receivable of Rs. 20,000 endorsed in favour of creditors
Bills Receivable of Rs. 40,000 discounted with bank at Rs. 39,000.

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CA Inter Accounts | Preparation of Accounts from Incomplete Records 19.12

Concept Question No. 4

Calculate credit purchases for the year.

Particulars Rs. Particulars Rs.

Creditors as on 1.1.2008 15,000 Bills Payable Dishonoured 500
Creditors as on 31.12.2008 12,000 Bills Receivable endorsed in favour of creditors 7,000
Cash Paid to Creditors 10,000 Endorsed Bills Receivable dishonoured 3,000
Cash Purchase 20,000 Bills Payable accepted 6,000
Discount received 2,000
Provision for bad debts 1,000

Concept Question No. 5

Calculate the Bills payable accepted during the year.

Particulars Rs.
Balance of Bills Payable as on 1.1.2008 10,000
Balance of Bills Payable as on 31.12.2008 14,000
Bills Payable discharged 16,000

Concept Question No. 6

From the following information, calculate drawing’s in Cash by the Proprietor.

Particulars Rs Particulars Rs
Opening cash in hand 30,000 Cash purchases 16,000
Opening cash at bank 22,000 Miscellaneous expenses paid 2,000
Cash sales 20,000 Cash collection from debtors 25,000
Collection from debtors cheque 15,000 Cheque issued to creditors 18,000
Fixed asset purchased, paid by cash 4,000 Cash deposited in bank 30,000
Withdraw from bank 16,000 Closing cash in hand 19,000

Concept Question No. 7

Sanjay is in business but does not keep full accounting records. For the year ended
31.12.2007, he is able to provide you with the following information (all figures in rupees)
Date Stock Debtors Creditors Furniture
1.1.2007 29,500 3,250 7,360 12,000

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31.12.2007 32,710 5,010 10,140 10,500

You are able to prepare the following summary of his cash and bank transactions for 2007 :
Cash Rs Rs Bank Rs Rs
Opening balance 490 Opening balance 9,200
Receipts — Receipts —
Cash Sales 53,600 Cheques from Customers 17,330
Cheque Cashed 2,600 56,200 Paid into Bank 39,950 57,280
56,690 66,480
Payments — Payments —
Purchases 3,400 Creditors 29,500
Wages 1,020 Wages 3,710
Other Expenses 2,260 Other Expenses 7,700
Drawings 8,200 Rent 12,500
Paid into Bank 39,950 54,830 Cash Withdrawn 2,600 56,010
Closing Balance 1,860 Closing Balance 10,470
You are required to prepare Trading and Profit and Loss Account for the year ended 31.12.2007 and
a Balance Sheet as on that date.

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Let’s Get Started….With Class Work

1. ICAI Material Illustration No 1

Assets and Liabilities of Mr. X as on 31-12-2013 and 31-12-2014 are as follows:
Particular 31-12-2013 31-12-2014
Assets
Building 1,00,000 -
Furniture 50,000 -
Inventory 1,20,000 2,70,000
Sundry debtors 40,000 90,000
Cash at bank 70,000 85,000
Cash in hand 1,200 3,200
Liabilities
Loans 1,00,000 80,000
Sundry creditors 40,000 70,000
Decided to depreciate building by 2.5% and furniture by 10%. One Life Insurance Policy of the
Proprietor was matured during the period and the amount 40,000 is retained in the business.
Proprietor took @ 2,000 p.m. for meeting family expenses. Prepare Statement of Affairs.

2. ICAI Material Illustration No 2

Take figures given above question no. 1. Find out profit of Mr. X.

3. ICAI Material Illustration No 4

The Income Tax Officer, on assessing the income of Shri Moti for the financial years 2013- 2014
and 2014-2015 feels that Shri Moti has not disclosed the full income. He gives you the following
particulars of assets and liabilities of Shri Moti as on 1st April, 2013 and 1st April, 2015.
Date Particulars `
01-04-2013 Assets Cash in hand 25,500
Inventory 56,000
Sundry debtors 41,500
Land and Building 1,90,000

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Wife’s Jewellery 75,000

Liabilities Owing to Moti’s Brother 40,000
Sundry creditors 35,000
01-04-2015 Assets Cash in hand 16,000
Inventory 91,500
Sundry debtors 52,500
Land and Building 1,90,000
Motor Car 1,25,000
Wife’s Jewellery 1,25,000
Loan to Moti’s Brother 20,000
Liabilities Sundry creditors 55,000
During the two years the domestic expenditure was ` 4,000 p.m. The declared income of the
financial years were ` 1,05,000 for 2013-2014 and ` 1,23,000 for 2014-2015 respectively.
State whether the Income-tax Officer’s contention is correct. Explain by giving your workings.

4. ICAI Material Illustration No 6

A. Adamjee keeps his books on single entry basis. The analysis of the cash book for the year
ended on 31st December, 2014 is given below:
Receipts ` Payments `
To Bank Balance as on 1st Jan 2,800 By Payments to Sundry 35,000
To Received from Sundry Debtors 48,000 By Salaries 6,500
To Cash Sales 11,000 By General expenses 2,500
To Capital brought during the year 6,000 By Rent and Taxes 1,500
To Interest on Investments 200 By Drawings 3,600
By Cash purchases 12,000
By Balance at Bank on 31stDec.,14 6,400

By Cash in hand on 31st Dec. 500

Total 68,000 Total 68,000
Particulars of other assets and liabilities are as follows:
Particular 1st January, 2014 31st December, 2014
Sundry debtors 14,500 17,600
Sundry creditors 5,800 7,900
Machinery 7,500 7,500
Furniture 1,200 1,200

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Inventory 3,900 5,700

Investments 5,000 5,000
Prepare final accounts for the year ending 31st December, 2014 after providing depreciation at
10 percent on machinery and furniture and ` 800 against doubtful debts.

5. ICAI Illustration No 8
Mr. Anup runs a wholesale business where in all purchases and sales are made on credit. He
furnishes the following closing balances:
Particular 31-12-2013 31-12-2014
Sundry debtors 70,000 92,000
Bills receivable 15,000 6,000
Bills payable 12,000 14,000
Sundry creditors 40,000 56,000
Inventory 1,10,000 1,90,000
Bank 90,000 87,000
Cash 5,200 5,300
Summary of cash transactions during the year 2014:
(i) Deposited to bank after payment of shop expenses @ 600 p.m., salary @ 9,200 p.m.
and personal expenses @ 1,400 p.m. 7,62,750.
(ii) Cash Withdrawn from bank 1,21,000.
(iii) Cash payment to suppliers 77,200 for supplies and 25,000 for furniture.
(iv) Cheques collected from customers but dishonoured 5,700.
(v) Bills accepted by customers 40,000.
(vi) Bills endorsed 10,000.
(vii) Bills discounted 20,000, discount 750.0
(viii) Bills matured and duly collected 16,000.
(ix) Bills accepted 24,000.
(x) Paid suppliers by cheque 3,20,000.
(xi) Received 20,000 on maturity of one LIC policy of the proprietor by cheque.
(xii) Rent received 14,000 by cheque for the premises owned by proprietor.
(xiii) A building was purchased on 30-11-2014 for opening a branch for 3,50,000 and some
expenses were incurred on this building, details of which are not maintained.
(xiv) Electricity and telephone bills paid by cash 18,700, due 2,200.
Other transactions:
(i) Claim against the firm for damage 1,55,000 is under legal dispute. Legal expenses 17,000.

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The firm anticipates defeat in the suit.

(ii) Goods returned to suppliers 4,200.
(iii) Goods returned by customers 1,200.
(iv) Discount offered by suppliers 2,700.
(v) Discount offered to the customers 2,400.
(vi) The business is carried on at the rented premises for an annual rent of 20,000 which
is outstanding at the year end.
Prepare Trading and Profit & Loss Account of Mr. Anup for the year ended 31-12-2014 and
Balance Sheet as on that date.

6. ICAI Material Practical Question No 1

Company sold 20% of the goods on cash basis and the balance on credit basis. Debtors are
allowed 1½ month's credit and their balance as on 31.03.2015 is ` 1, 25,000. Assume that the sale
is uniform throughout the year. Calculate the credit sales and total sales of the company for the
year ended 31.03.2015.

7. ICAI Material Practical Question No 2

Mr. A runs a business of ready made garments. He closes the books of accounts on 31st March.
The Balance Sheet as on 31st March, 2011 was as follows
Liabilities ` Assets `
A’s capital a/c 4,04,000 Furniture 40,000
Creditors 82,000 Stock 2,80,000
Debtors 1,00,000
Cash in hand 28,000
Cash at bank 38,000
4,86,000 4,86,000
You are furnished with the following information:
(1) His sales, for the year ended 31st March, 2012 were 20% higher than the sales of previous
year, out of which 20% sales was cash sales. Total sales during the year 2010-11 were `
5,00,000.
(2) Payments for all the purchases were made by cheques only.

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(3) Goods were sold for cash and credit both. Credit customers pay be cheques only.
(4) Depreciation on furniture is to be charged 10% p.a.
(5) Mr. A sent to the bank the collection of the month at the last date of the each month after
paying salary of ` 2,000 to the clerk, office expenses ` 1,200 and personal expenses ` 500.
Analysis of bank pass book for the year ending 31st March 2012 disclosed the following:
Particulars `
Payment to creditors 3,00,000
Payment of rent up to 31st March, 2012 16,000
Cash deposited into the bank during the year 80,000
The following are the balances on 31st March, 2012:
Particulars `
Stock 1,60,000
Debtors 1,20,000
Creditors for goods 1,46,000
On the evening of 31st March 2012, the cashier absconded with the available cash in the cash
book.
You are required to prepare Trading and Profit and Loss A/c for the year ended 31 st March, 2012
and Balance Sheet as on that date. All the workings should form part of the answer.

8. ICAI – Illustration 1
Raju does not maintain proper records of his business. However, he provides the following
information: `
Opening capital 10,000
Closing capital 12,500
Drawings during the year 3,000
Capital added during the year 3,750
You are required to calculate the profit or loss for the year.

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9. ICAI – Illustration 2
Rakesh started his business on 1st of April 2021. He invested a capital of Rs 1,00,000. On 31st March
2022, he has the following information available as per the Single-entry system
maintained by him. `
Cash balance (counted) 3,200
Inventory (physically verified) 34,800
Receivable from Ajay against credit sales 31,000
Machine 85,000
Payable to Vinod towards credit purchase 12,000
Loan taken from Bank 10,000
Drawings made during the year 24,000
You are required to calculate the profit or loss earned by Rakesh for the year ended 31st March
2022.

10. ICAI – Illustration 6

Calculate the bad debts from the below information:
Opening balance of Debtors ` 5,00,000
Closing balance of Debtors ` 7,00,000
Amount received in Cash ` 6,00,000
Discount allowed ` 10,000
Credit Sales ` 11,40,000
Bills Receivable ` 3,00,000
Bad Debts ???

11. ICAI – Illustration 7

Calculate the credit purchases from the below information:
Opening balance of creditors ` 4,00,000
Closing balance of creditors ` 5,00,000

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Payments made in Cash ` 8,50,000

Discount received ` 20,000

12. ICAI – Illustration 9

From the following data furnished by Mr. Manoj, you are required to prepare a Trading and Profit
and Loss Account for the year ended 31st March, 2022 and Balance Sheet as at that date. All
workings should form part of your answer.
Assets and Liabilities As on 1st April 2021 As on 31st March 2022
` `
Creditors 15,770 12,400
Sundry expenses outstanding 600 330
Sundry Assets 11,610 12,040
Inventory in trade 8,040 11,120
Cash in hand and at bank 6,960 8,080
Trade debtors ? 17,870
Details relating to transactions in the year:
Cash and discount credited to debtors 64,000
Sales return 1,450
Bad debts 420
Sales (cash and credit) 71,810
Discount allowed by trade creditors 700
Purchase returns 400
Additional capital-paid into Bank 8,500
Realisations from debtors-paid into Bank 62,500
Cash purchases 1,030
Cash expenses 9,570
Paid by cheque for machinery purchased 430
Household expenses drawn from Bank 3,180
Cash paid into Bank 5,000
Cash drawn from Bank 9,240
Cash in hand on 31-3-2022 1,200
Cheques issued to trade creditors 60,270

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13. ICAI Material Practical Question No 3

Ram carried on business as retail merchant. He has not maintained regular account books.
However, he always maintained ` 10,000 in cash and deposited the balance into the bank account.
He informs you that he has sold goods at profit of 25% on sales.
Following information is given to you:
Assets and Liabilities As on 1.4.2021 As on 31.3.2022
Cash in Hand 10,000 10,000
Sundry Creditors 40,000 90,000
Cash at Bank 50,000 (Cr.) 80,000 (Dr.)
Sundry Debtors 1,00,000 3,50,000
Stock in Trade 2,80,000 ?
Ram’s capital 3,00,000 ?
Analysis of his bank pass book reveals the following information:
a) Payment to creditors ` 7,00,000
b) Payment for business expenses ` 1,20,000
c) Receipts from debtors ` 7,50,000
d) Loan ` 1,00,000 taken on 1.10.2021 at 10% per annum
e) Cash deposited in the bank ` 1,00,000
He informs you that he paid creditors for goods ` 20,000 in cash and salaries ` 40,000 in cash. He
has drawn ` 80,000 in cash for personal expenses. During the year Ram had not introduced any
additional capital. Surplus cash if any, to be taken as cash sales. All purchases are on credit basis.
You are required to prepare Trading and Profit and Loss Account for the year ended 31.3.2022 and
Balance Sheet as at 31st March, 2022.

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ADDITIONAL QUESTIONS FOR SELF PRACTICE

1. The following information of a concern is available :

a.
Assets and Liabilities 1.1.2010 (Opening) 31.12.2010 (Closing)
Furniture 6,000 6,350
Stock 8,000 7,000
Sundry Debtors 16,000 ?
Sundry Creditors 11,000 15,000
Prepaid Expenses 600 700
Unpaid expenses 2,000 1,800
Cash in hand and bank 1,200 625
b. Receipts and Payments during the year –
Particulars Rs.
Receipts from Debtors 58,500(Discount at 2.5%)
Bills receivable discounted 6,125 (Discount at 2%)
Creditor paid 39,200(Discount at 2%)
Freight inwards paid 3,000
Drawings 7,000
Furniture purchased 1,000
Investment (4%) purchased at Rs. 96 on 1.7.2010 9,600
Expenses including salaries 14,500
Miscellaneous Receipts. 500
c. During the year Bills Receivable received was Rs. 10,000, Rs. 2,000 of which were endorsed
in favour of creditors, of these a bill for Rs. 400 was dishonoured.
d. Goods costing Rs. 900 were used as advertising materials.
e. Goods are invariably sold to show a profit of 33 1/3%.
f. Difference in cash book, if any, is to be treated as drawings or introduction by the
proprietor.
Make a provision of 2 ½% on Debtors for doubtful debtors and prepare the Trading and Profit
and Loss Account for the year ended 31st December, 2010 and Balance Sheet as at that date.

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2. From the following information obtained from Mr. X a trader who does not keep accounts,
prepare a Trading and Profit and Loss Account for the year ended 31 st March, 2011 and the
Balance Sheet as on that date.
a. Withdrawals from Pass Book :
Particulars Rs.
Rent, Rates, Taxes and Insurance 12,000
Furniture (Purchased on 1st April, 2010) 2,000
Advertisement Expenses 2,000
Postage and Telephone 1,000
Drawings 10,000
Paid for Purchases 50,000
Salaries 8,000
Wages 8,000
b. Balance at Bank on 31.3.2011 was Rs. 3,000.
c. Stock on 1.4.2010 was Rs. 24,000 and stock on 31.3.2011 was Rs. 4,000 less than that of
opening stock. Out of stock on 1.4.2010 spoiled stocks were sold for Rs. 2,000 which were
not deposited into Bank Account.
d. Payments for Purchases include Rs. 4,000 for last year’s purchase. Current year’s list of
unpaid invoices not ticked off in purchase register amounts to Rs. 5,000. Purchase amount
of Rs. 1,000 of previous year still remains unpaid.
e. Collections for sale were Rs. 1,00,000 which includes Rs. 12,000 in respect of previous year’s
sale. Balance of un-ticked bills of last year’s sale still due Rs. 8,000 on 31.3.2011. Un-ticked
bills of the current year totalled upto Rs. 20,000.
f. Salaries Rs. 500 and wages Rs. 500 were outstanding on 31.3.2011.
g. Furniture on 1.4.2010 amounts to Rs. 6,000 and machinery on the same date amounts to
Rs. 50,000.
h. Prepaid insurance amounted to Rs. 400 on 31.3.2011.
i. Depreciation shall be provided at 10% on Furniture and at 25% on Machinery.
He maintains purchases and sales register and items are ticked off on collection or payment.
All collections are deposited and payments are all by cheque. Rs. 1,000 petty expenses were
paid out of his drawings. All purchases and sales were on credit basis.

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