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