NCERT Solution for class 11 Accountancy Accounts from Incomplete Records Chapter 11
Accounts from Incomplete Records Class 11Intoduction
Chapter 11,”Accounts from Incomplete Records,”introduces the accounting challenges faced by businesses operating without a complete set of records, often employing a single-entry system. Incomplete records hinder the straightforward preparation of financial statements, necessitating the reconstruction of missing information. The chapter outlines the limitations of such accounting systems, emphasizing the importance of reconstructing data to ascertain accurate financial results. The introduction provides an overview of the single-entry system,
Accounts from Incomplete Records Class11 Important Notes
- Single-Entry System:
- Definition and explanation of the single-entry system.
- Discussion of how it differs from the double-entry system.
- Characteristics of Incomplete Records:
- Identification of scenarios where businesses might maintain incomplete records.
- Understanding the implications of missing or incomplete financial information.
- Methods of Reconstruction:
- Overview of various methods used to reconstruct accounts, such as the statement of affairs method and the conversion method.
- Application of these methods to real-world examples.
- Calculation of Profit/Loss:
- Techniques for determining the financial performance of a business despite incomplete records.
- Formulas or approaches for calculating profit or loss.
- Preparation of Financial Statements:
- Steps involved in preparing financial statements when records are incomplete.
- Adjustments and reconciliations needed for accurate financial reporting.
- Limitations and Challenges:
- Discussion of the limitations and challenges associated with working with incomplete records.
- Consideration of the impact on decision-making and financial analysis.
- Comparative Analysis:
- Comparison between the single-entry system and the double-entry system.
- Understanding the advantages and disadvantages of each.
- Case Studies:
- Practical examples or case studies illustrating the application of reconstruction methods.
- Analysis of financial statements derived from incomplete records.
- Importance in Decision-Making:
- Emphasis on the significance of accurate financial information in informed decision-making.
- Discussion on how reconstructed accounts contribute to effective financial management.
Accounts from Incomplete Records Class 11 Important Formates .
Statement of Affairs as on ..
Liabilities | Amount | Assets | Amount |
bills payable creditors outstanding expense capital (balancing figure) | — — — — | Land and buidling plant and machinery furniture stock debtors cash and bank prepaid expenses capital- Deficiency (balancing figure’if any) | — — —- —- — —- —- — — |
Explanation
- Assets Section:
- Cash and Bank Balances: Record the amount of cash on hand and in bank accounts.
- Debtors/Receivables: List amounts owed to the entity by others.
- Stock or Inventory: Include the value of goods or products held for sale.
- Fixed Assets: Capture the value of long-term assets like property, machinery, or vehicles.
- Liabilities Section:
- Creditors/Payables: Record amounts owed by the entity to suppliers or others.
- Loans Payable: Include outstanding loans or borrowings.
- Accrued Expenses: Account for any expenses that have been incurred but not yet paid.
- Mortgages/Debentures: List long-term liabilities like mortgages or debentures.
- Calculation of Net Worth:
- Subtract the total liabilities from the total assets to calculate the net worth or equity.
- Comparison with Previous Period:
- If the Statement of Affairs is prepared for comparative purposes, note any changes in assets, liabilities, or net worth from the previous period.
- Adjustments for Accruals and Prepayments:
- Make adjustments for any income or expenses that are accrued (earned but not received) or prepaid (paid but not incurred).
- Contingent Liabilities:
- Disclose any contingent liabilities, which are potential liabilities that depend on future events.
- Non-Business Assets and Liabilities:
- Include personal assets and liabilities if the Statement of Affairs is for an individual.
- Capital Introduced or Withdrawn:
- Record any additional capital introduced by the owner or withdrawals made during the period.
- Depreciation:
- If applicable, consider the depreciation of fixed assets to reflect their reduced value.
- Closing Net Worth:
- Summarize the closing net worth, which indicates the financial position at the end of the specified period.
statement of profit and loss for the year ended..
Particular | Amount |
Closing capital at the end of the year Add: Drawings made during the year Less: Additional capital introduced during the year Adjusted capital at the end of the year Less: capital in the beginning of the year Profit (loss) for the year (balancing figure) | — — —- — — — |
Explanation
- Revenue Section:
- Sales or Revenue: The total amount earned by the business from its primary operations.
- Other Operating Revenues: Additional income generated from sources other than core business activities.
- Cost of Goods Sold (COGS):
- Direct Costs: Expenses directly associated with the production of goods or services.
- Cost of Materials, Labor, and Overheads: Specific costs incurred to produce goods or deliver services.
- Gross Profit:
- Subtract COGS from total revenue to calculate the gross profit. It represents the profit before deducting operating expenses.
- Operating Expenses:
- Selling Expenses: Costs related to selling products or services (e.g., advertising, marketing).
- Administrative Expenses: General operational costs not directly tied to production.
- Operating Profit (or Operating Income):
- Subtract total operating expenses from gross profit to determine the operating profit.
- Other Income and Expenses:
- Interest Income/Expense: Gains or losses from interest-bearing assets or liabilities.
- Non-operating Gains/Losses: Profits or losses from non-core business activities.
- Profit Before Tax (PBT):
- Add or subtract other income and expenses from the operating profit to obtain the profit before tax.
- Tax Expenses:
- The amount of income tax owed based on the profit before tax.
- Net Profit (or Net Income):
- Subtract tax expenses from the profit before tax to calculate the net profit. This is the final amount representing the profit for the period.
- Earnings per Share (EPS):
- For public companies, the earnings per share is calculated by dividing the net profit by the average number of outstanding shares during the period.
- Dividends:
- If applicable, dividends paid to shareholders are disclosed.
Accounts from Incomplete Records Class 11 Question and Answer
Question:1 state the meaning of incomplete records ?
Answer: Accounts that are not recorded as per the double entry system are known as incomplete records. according to kohler (dictionary for accountants) single entry system is defined as, A system of book keeping in which as a rule, only records of cash and of personal accounts are maintained. it is always incomplete double entry, varying with circumstances’
many small-sized business firms maintain incomplete records of their business transaction they do not maintain proper books of accounts and mainly prepare books like, cash book personal accounts (of debtors and creditors) and balance sheet at the end of the year.
Question:2 what are the possible reasons for keeping incomplete records ?
Answer: The possible reasons for keeping incomplete records are.
- simple method: proprietors, who do not have the proper knowledge of accounting principles, find it much convenient and easier to maintain their business records under this system
- less time consuming: maintaining books according to the single entry system is less time consuming as only few books are to be maintained, further the books are not as comprehensive as they are under double entry system
- less expensive: it an economical mode of maintaining records, as there is no need to appoint specialised accountant.
- Flexible: Owner may record transactions as per his/ her own needs, it can be easily adjusted or changed whenever needed.
Question:3 Distinguish between statement of affairs and balance sheet.
Answer
Difference between statement of Affairs and balance sheet
basis of difference | statement of Affairs | balance sheet |
Objective | It is prepared determine the amount of capital at a particular date. | It is prepared to asecrtain the true financial position. |
Reliability | It is based on estimates, hence, it is less reliable. | It is based on sophisticated and well developed principles, hence, it is more reliable. |
Accounting method | It is prepared from incomplete records of business transactions under single entry system. | it is prepared when accounts are maintained under double entry system. |
Accounts from Incomplete Records Class 11 Numerical Question and Answer
Question:1 Following information is given below prepare the statement of profit and loss.
Transactions | Amount |
Capital at the end of the year | 5,00,000 |
Capital in the beginning of the year | 7,50,000 |
Drawing made during the period | 3,75,000 |
Additional capital intoduced | 50,000 |
Answer:
statement of Profit and loss A/c
Particulars | Amount |
Capital at the end of the year Add: Drawing made during the year Less: capital in the beginning of the year Less: Additional capital Introduced | 5,00,000 3,75,000 (7,50,000) (50,000) |
Profit during the year | 75,000 |
Question:2 Manveer started his business on january 01, 2005 with a capital of Rs, 4,50,000.on December 31,2005 his position was as under.
Transactions | Rs |
Cash | 99,000 |
bills receivable | 75,000 |
plant | 48,000 |
land and building | 1,80,000 |
furniture | 50,000 |
He owned Rs, 45,000 from his friend Susheel on that date. he withdrew Rs, 8,000 per month for his household purposes. Ascertain his profit or loss for this year ended December. 31,2005
Answer
Books of Manveer
statement of Affairs as on December 31,2005
Liabilities | Amount | Assets | Amount |
Loan from susheel Closing capital (balancing figure) | 45,000 4,07,000 | cash Bills Receivable plant Land and building Furniture | 99,000 75,000 48,000 1,80,000 50,000 |
4,52,000 | 4,52,000 |
statement of profit and loss as on Decmber 31,2005
Particulars | Rs |
Capital on December 31,2005 Add: Drawing made during the year (Rs, 8,000×12) Less: Capital on january 01,2005 | 4,07,000 96,000 (4,50,000) |
Profit during the year 2005 | 53,000 |
Question:3 From the Information given below ascertain the profit for the year.
Transactions | Amount |
Capital at the beginning of the year | 70,000 |
Additional capital intoduced during the year | 17,500 |
stock | 59,500 |
sundry debtors | 25,900 |
Business premises | 8,600 |
Machinery | 2,100 |
sundry creditors | 33,400 |
Drawing made during the year | 26,400 |
Answer
Statement of Affairs
Liabilities | Amount | Assets | Amount |
sundry creditors Capital (balancing figure) | 33,400 62,700 | stock sundry debtors business premises machinery | 59,500 25,900 8,600 2,100 |
96,100 | 96,100 |
Statement of Profit and loss
Particulars | Amount |
Capital at the end of the year Add: Drawing made during the year Less: capital of the beginning of the year Less:Additional capital intoduced during the year | 62,700 26,400 (70,000) (17,500) |
Profit during the year | 1,600 |
Question:4 Following Information is given below. calculate the closing capital
Transactions | Jan 01,2005 Rs | Dec 31,2005 Rs |
creditors | 5,000 | 30,000 |
Bills payable | 10,000 | |
Loan | — | 50,000 |
bills receivable | 30,000 | 50,000 |
stock | 5,000 | 30,000 |
cash | 2,000 | 20,000 |
Calculation of profit or loss and ascertainment of statement of affairs at the end of the year (opening balance is given )
Answer:
statement of Affairs as on January 01,2005
Liabilities | Amount | Assets | Amount |
creditors bills payable Capital (balancing figure) | 5,000 10,000 22,000 | Bills Receivable stock Cash | 30,000 5,000 2000 |
37,000 | 37,000 |
statement of Affairs as on December 31,2005
Liabilities | Amount | Assets | Amount |
Creditors Loan Capital (balancing figure) | 30,000 50,000 20,000 | Bills Receivable stock Cash | 50,000 30,000 20,000 |
1,00,000 | 1,00,000 |
Capital On December 31,2005 (closing ) Rs, 20,000
Statement of Profit and loss
Particulars | Amount |
Capital on December 31,2005 Less: Capital on January 01,2005 | 20,000 (22,000) |
Loss:during the year 2005 | (2,000) |
Question:5 Mrs Anu started firm with a capital of Rs, 4,00,000 on 1sth July 2005, she borrowed from her friends a sum of Rs, 1,00,000 @ 10% per annum (Interest paid) for business and brought a further amount of capital Rs, 75,000 on December, 31,2005 her position was.
Transaction | Rs |
Cash | 30,000 |
stock | 4,70,000 |
Debtors | 3,50,000 |
Creditors | 3,00,000 |
He withdrew Rs, 8,000 per month for the year. calculate profit or loss for the year and show your working clearly.
Answer:
Books of Mrs. Anu
statement of Affairs as on December 31,2005
Liabilities | Amount | Assets | Amount |
Creditors 10% Loan from friends capital (balancing figure) | 3,00,000 1,00,000 4,50,000 | Cash stock Debtors | 30,000 4,70,000 3,50,000 |
8,50,000 | 8,50,000 |
statement profit and loss as on December 31,2005
Particulars | Amount |
Capital on December 31,2005 Add: Drawing during the year (8,000×6 months) Less: Capital on January 01,2005 Less: Additional Capital Introduced | 4,50,000 48,000 (4,00,000) (75,000) |
Mrs. Anu earned profit during the year 2005 | 23,000 |
Read Also
- Theory base of Accounting class 11
- 1 Recording of transactions-1 class 11
- Recording of Transaction-2 class 11
Accounts from Incomplete Records Class 11
Conclusion
In conclusion, the study of “Accounts from Incomplete Records” in Class 11 sheds light on the unique challenges and methodologies involved in managing financial information when a business employs a single-entry accounting system or lacks a complete set of records.