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Single Entry System
SINGLE ENTRY SYSTEM
QUESTION ANSWER

PROFIT CALCULATION BY CAPITAL COMPARISON METHOD
Q.1. Suresh does not maintain his books of accounts under the double entry system but keeps slips of papers from which he makes up his annual accounts. He has borrowed money from a bank to which he has to render figures of profits every year. He has given the bank the following profit figures:


The bank appoints you to audit the statements and verify whether the figures of profits reported are correct or not, for this purpose, the following figure are made available to you:
(a) Position as on 31st December, 1986: Sundry Debtors Rs. 20,000; Stock on trade (at 95% of the cost) Rs. 47,500; Cash on hand and at bank Rs. 12,600; Trade creditors Rs. 6,000; Expenses due Rs. 1,600.
(b) He had borrowed Rs. 5,000 from his wife on 30th September, 1986 on which he had agreed to pay simple interest at 12% p.a. The loan was repaid along with interest on 31st December, 1988.
(c) In December, 1987, he had advanced Rs. 8,000 to A for purchase of a vacant land. The property was registered in March, 1989 after payment of balance consideration of Rs. 32,000. Costs of registration incurred for this were Rs. 7,500.
(d) Suresh purchased Jewellery for Rs. 15,000 for his daughter in October, 1989, Marriage expenses incurred in January, 1990 were Rs. 24,000.
(e) A new V.C.R was purchased by him in March 1991 for Rs. 18,000 and presented by him to his friend in November 1991.
(f) His annual household expenses amounted to a minimum of Rs.24,009.
(g) The position of assets and liabilities as on 31st December 1991 was found to be: Overdraft with bank (secured against property) Rs. 12,000; Trade creditors Rs. 10,000; Expenses payable Rs. 600; Sundry debtors (including Rs. 600 due from a peon declared insolvent by court) Rs. 28,800; Stock in trade (at 125% of cost to reflect market value) Rs. 60,000 and Cash on, hand Rs. 250.
It is found that the rate of profit has been uniform throughout the per Y. and the proportion of sales during the years to total sales for the period was it ratio of 3:4:4:6:8.
Ascertain the annual profits and indicate differences, if any, with those reputed by Suresh to the bank earlier.
All workings are to form pan of your answer.

Q.2. Purchases made during the year Rs. 2,00,000; Sales made during the year Rs. 3,00,000: Closing stock Rs. 20,000; Wages, freight Rs. 5,000, Indirect expenses Rs. 7,000; Rate of gross profit on cost  1/2.

Q.3. From the following information you are required to calculate total purchases:

Rs.
Cash purchases 85,000
Creditors as on April 1. 2002 40,000
Cash paid to creditors 1,55,000
Purchases returns 5,000
Creditors as on March 31, 2003 67,000

Q.3.

From the following facts you are required to calculate total purchases :

Rs.
Opening balance of bills payable 50,000
Opening balance of creditors 60,000
Closing balance of bills payable 70,000
Closing balance of creditors 40,000
Cash paid to creditors during the year 3,02,000
Bills payable discharged during the year 89,000
Returns outward 12,000
Cash purchases 2,58,000

Q.4.

Mr. X does not keep complete records of his business but gives you the following information: His assets on 31s' March, 2007 consisted of : Machineries Rs. 1,50,000; Furniture Rs. 60,000; Motor Car Rs. 40,000; Stock-in-trade Rs. 50,000; Debtors Rs. 80,000; Cash-in-hand Rs. 12,000 and Cash at Bank Rs. 30,000; Creditors on that date amounted to Rs. 1,20,000.
On further information received, you come to know that :
(i) On 1st October, 2006 he purchased a new machinery costing Rs. 50,000.
(ii) Sales are made for cash as well as on credit. There are no cash purchases. He always sells his goods at cost plus 25%. Cash sales for the year were accounted for Rs. 80,000.
(iii) During the year collection from Debtors amounted to Rs. 5,00,000 and a sum of Rs. 4,25,000 was paid to creditors.
(iv) He obtained a bank loan for Rs. 50,000 on 1st April, 2006, the entire amount was repaid in February, 2007 with interest Rs. 2,500.
(v) On 1st November, 2006 his Life Insurance Policy for Rs. 50,000 became matured and the same was invested in the business. His drawings were Rs. 2,500 per month all throughout the year.
(vi) On 1st April, 2006 he had Rs. 1,500 as cash-in-hand and balance at bank for Rs. 40,000. Debtors and creditors on that date amounted to Rs. 60,000 and Rs. 90,000 respectively.
(vii) Provide depreciation on Machineries @ 15% p.a. Furniture @ 10% p.a. and on Motor Car at 20% p.a.

Prepare a Trading and Profit & Loss Account for the year ended 31st March, 2007 and a Balance Sheet as on that date.

TRUE OR FALSE

Q.1. In single entry system only one entry is made for all types of transactions

Ans. False : It is only for some transactions that single entry is made whereas some transactions are recorded with proper debits and credits.

Q.2. Statement of Affairs is similar to Balance Sheet.

Ans. True : Statement of Affairs is not Balance Sheet because items appearing therein are not extracted from ledger balances. Hence it is only similar to balance sheet because it contains information about assets and liabilities.

Q.3. A trial balance can be extracted under pure single entry system.

Ans. False : In the absence of proper books of account under single entry system, it is not possible to extract a trial balance.

Q.4. Conversion method is possible in every case of incomplete records.

Ans. False : Conversion method is possible only if the information about nominal accounts, along with real and personal accounts is obtained.

Q.5. Missing credit sales are found by preparing cash account.

Ans. False : Missing credit sales can be found only by preparing Total or Sundry Debtors Account.

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