NCERT Notes For Class 11 Accountancy Chapter 11 Accounts From Incomplete Records

NCERT Notes for Class 11 Accountancy Chapter 11 Accounts from incomplete records

Class 11 Accountancy Chapter 11 Accounts from incomplete records

NCERT Notes for Class 11 Accountancy Chapter 11 Accounts from incomplete records, (Accountancy) exam are Students are taught thru NCERT books in some of state board and CBSE Schools.  As the chapter involves an end, there is an exercise provided to assist students prepare for evaluation.  Students need to clear up those exercises very well because the questions with inside the very last asked from those. 

Sometimes, students get stuck with inside the exercises and are not able to clear up all of the questions.  To assist students, solve all of the questions and maintain their studies without a doubt, we have provided step by step NCERT Notes for the students for all classes.  These answers will similarly help students in scoring better marks with the assist of properly illustrated Notes as a way to similarly assist the students and answering the questions right.

NCERT Notes for Class 11 Accountancy Chapter 11 Accounts from incomplete records

Class 11 Accountancy Chapter 11 Accounts from incomplete records

 

Accounts from incomplete records

  • An account system which is not based on double entry is known as incomplete accounting system or single-entry system.
  • It is incomplete because in this system only personal aspect of each transaction are recorded and nominal and real accounts are completely ignored.
  • So, this system is incomplete, inaccurate, unsystematic, and incomplete.

Reason for incompleteness

  1. This system is suitable to small concerns which have mainly cash transaction.
  2. This system is economical since lesser numbers of books are maintained.
  3. Lack of knowledge of double entry system.
  4. Intentional omission to take advantage of taxation.

Limitations

  1. Arithmetical accuracy of books of accounts cannot be proved.
  2. It is difficult to determine the exact profit or loss.
  3. The value of assets and liabilities are not reliable.
  4. It increases the chance of error and fraud.
  5. It is not accepted as reliable by It Department, banks and government

Ascertainment of profit or loss

Under single entry system the profit or loss can be ascertained by following ways.

  1. Statement of affairs method
  2. Conversion method

Ascertainment of profit or loss by preparing the statement of affairs

Under this method profit or loss can be ascertained by comparing the capital at the beginning and at the end of the financial period. For this purpose two statements are prepared.

a. Statement of affairs

  • It is a statement prepared by presenting the assets on one side and liabilities on the other side as in the case of the balance sheet.
  • The difference between the two sides is known as owner’s equity or capital.
  • The difference between statement of affairs and balance sheet are in statement of affairs balances of various assets and liabilities are not derived from ledger account.
  • Statement of affairs is prepared to find out capital where as a balance sheet is prepared to disclose the financial position.

b. statement of profit or loss.

  • The statement prepared to ascertain the profit or loss by comparing the opening capital and closing capital is called statement of profit or loss.
  • The capital at the end of the year exceeds the capital at the beginning is treated as profit.
  • Capital at the beginning is more than the capital at the end is loss

Format of statement of profit or loss

Particulars

Amount

Capital at the end of the year

Add- drawings during the year

Less- Additional Capital introduced during the year

Adjusted Capital at the end of the year

Less-Capital at the beginning of the year

Profit or loss made during the year

xxxx xxx xxx

xxxx

xxx

xxxx

 

 

Difference between statement of affairs and Balance sheet

 

Basis of difference

Statement of affairs

Balance Sheet

Reliability

It is less reliable as it is prepared from incomplete records.

It is more reliable as it is prepared from double entry records

Objective

The objective of preparing statement of affairs is to find out the amount of capital

The objective of preparing balance sheet is to show the true financial position.

Omission

Omission of assets or liabilities cannot be discovered easily

Omission of assets and liabilities can be easily discovered

 

Preparation of profit and loss account and balance sheet under conversion method

  • The method of preparing the financial statement by converting the accounts under single entry to double entry is called conversion method.
  • Under this method final accounts are to be prepared directly with whatever information available.
  • If such information is inadequate or missing it should be ascertained by preparing relevant ledger accounts.

The most common items that are missing and have to be worked out are

  • opening capital
  • Credit purchase
  • Credit sale
  • Bills payable accepted
  • Bills receivable received
  • Payments to creditors
  • Payments to debtors
  • Any other cash / bank related items

Ascertaining credit purchase

By preparing total creditors account, credit purchase or any missing figure related to creditors can be ascertained as the balancing figure

Total Creditors Account

Date

Particulars

J.F

Amount

Date

Particulars

J.F

Amount

 

Cash

Bills payable

Discount Received

Purchase Return

Balance c/d

 

xxx xxx xxx xxx xxx

 

Balance b/d

Bank (Cheque

Dishonoured)

Bills Payable (Bills Dishonoured)

Credit Purchase (b/f)

 

xxx xxx

 

xxx

 

xxx

xxxxx

xxxxx

 

 

 

Ascertainment of credit sales

For ascertaining the amount of credit sales the debtors account should be prepared. The available information should first be entered in this account. The balancing figure will then be the missing figure.

Total Debtors Account

Date

Particulars

J.F

Amount

Date

Particulars

J.F

Amount

 

Balance b/d

Bills Receivable (bill dishonoured)

Bank ( Cheque dishonoured)

Credit sale (b/f)

 

 

xxx xxx

 

xxx

 

xxx

 

Cash

Bank

Discount allowed

Bad debt

Sales Return

Bills Receivable

Balance c/d

 

xxx xxx xxx xxx xxx xxx xxx

xxxx

xxxx

 

 

Ascertainment of Bills receivable and Bills Payable

A bills receivable account and bills payable account are prepared to find out the missing item relating to bills.

Total Bills Receivable Account

Date

Particulars

J.F

Amount

Date

Particulars

J.F

Amount

 

Balance b/d

Sundry debtors (b/f)

(bills received)

 

xxx xxx

 

Bank

Sundry debtors (bill dishonoured)

Balance c/d

 

xxx xxx

 

xxx

xxxx

xxxx

 

 

Total Bills Payable Account

Date

Particulars

J.F

Amount

Date

Particulars

J.F

Amount

 

Bank

Sundry Creditors

(bills Dishonoured)

Balance c/d

 

xxx xxx

 

xxx

 

Balance b/d

Sundry debtors (b/f)

(bill accepted)

 

 

xxx xxx

 

xxxx

xxxx

 

 

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