Question

Explain about methods of single entry system in advanced accounting

Answer 1

STATEMENT OF AFFAIRS METHOD

When detailed information regarding revenue and expenses are not available ,it is difficult to arrive at the profit figure by preparing Profit &Loss Account.

In such situations profit is arrived by ascertaining the difference between the opening and closing capital and adjusting the same for other capital transactions such as fresh capital introduced ,drawings etc.

• Closing Capital - Opening Capital = Profit
• Capital(owner's funds) = Assets - Liablities

• Cash invested during interimn periods increase the capital and withdrawls reduce the capitalof the business

Ascertainment of Profit under Capital comparison Method

Capital at the end                                                     XXX

Add: Drawings                                                          XXX

Less: Fresh Capital Introduced                               (XXX)

      Capital at the beginning                                    (XXX)

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Profit                                                                          XXX

CONVERSION METHOD

• When the information given is sufficient, we prepare complete final accounts i.e.,

a) Trading Account for the year

b) Profit and Loss Account for the year

c)Balance Sheet

• All the necessary accounts can be prepared by double entry method & ascertain the information which is not given by balancing those accounts.

• Following Accounts can be prepared to find the missing data

1. Opening Statement Of Affairs
2. Debtors Account
3. Bills Receivable Account
4. Creditors Account
5. Bills Payable Account
6. Fixed Assets Account
7. Expenses Account
8. Cash/Bank Account (cash book)