NCERT Solutions Class 11 Accountancy Chapter 11

Q.1 State the meaning of incomplete records?

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Accounting records that are not maintained according to Double entry system are known as Accounts from Incomplete Records or Single Entry System of Accounting.

Q.2 What are the possible reasons for keeping incomplete records?

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Reasons for incompleteness are:

• This system can be adopted by people who do not have the proper knowledge of accounting principles.
• It is an inexpensive mode of maintaining records. Cost involved is low as specialised accountants are not appointed by the organisations.
• Time consumed in maintaining records is less as only a few books are maintained.
• It is a convenient mode of maintaining records as the owner may record only important transactions according to the need of the business.

Q.3 Distinguish between statement of affairs and balance sheet.

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Comparison between Statement of Affairs and Balance Sheet:

Q.4 What practical difficulties are encountered by a trader due to incompleteness of accounting records?

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Limitation of Incomplete records are as follows:

• As double entry system is not followed, a trial balance cannot be prepared and accuracy of accounts cannot be ensured.
• Correct ascertainment and evaluation of financial result of business operations cannot be made.
• Analysis of profitability, liquidity and solvency of the business cannot be done. This may cause a problem in raising funds from outsiders and planning future business activities.
• The owners face great difficulty in filing an insurance claim with an insurance company in case of loss of inventory by fire or theft.

Q.5 What is meant by a ‘statement of affairs’? How can the profit or loss of a trader be ascertained with the help of a statement of affairs?

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A statement of affairs is a statement of assets and liabilities. Under this method, statements of assets and liabilities as at the beginning and at the end of the relevant accounting period are prepared to ascertain the amount of change in the capital during the period.

Statement of affairs shows assets on one side and the liabilities on the other just as in case of a balance sheet. The difference between the totals of the two sides is the capital.

Once the amount of capital, both at the beginning and at the end is computed with the help of statement of affairs, a statement of profit and loss is prepared to ascertain the exact amount of profit or loss made during the year.

The difference between the opening and closing capital represents its increase or decrease which is to be adjusted for withdrawals made by the owner or any fresh capital introduced by him during the accounting period.

If the net result of above computation is a positive amount, it represents the profit earned during the year. In case the net result is a negative amount, it represents the loss during the year.

Profit or Loss = Capital at end – Capital at beginning + Drawings during the year – Capital introduced during the year.

Q.6 ‘Is it possible to prepare the profit and loss account and the balance sheet from the incomplete book of accounts kept by a trader? Do you agree? Explain.

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The main purpose of any business is to earn profit. To prepare proper trading and profit and loss account and the balance sheet one needs complete information regarding expenses, incomes, assets and liabilities.

This can be done in two ways:

• Preparing the Statement of Affairs as at the beginning and as at the end of the accounting period called statement of affairs or net worth method.
• Preparing Trading and profit and loss account and the Balance Sheet by putting the accounting records in proper order called conversion method.

Statement of Affairs Method:

A statement of affairs is a statement of assets and liabilities. Under this method, statements of assets and liabilities as at the beginning and at the end of the relevant accounting period are prepared to ascertain the amount of change in the capital during the period.

Once the amount of capital, both at the beginning and at the end is computed with the help of statement of affairs, a statement of profit and loss is prepared to ascertain the exact amount of profit or loss made during the year.

Conversion method:

Converting the accounts from single entry to double entry is called as conversion method.

The steps involved in converting single entry into double entry are:

• Prepare cash and bank summary.
• Prepare Total Debtors Account.
• Prepare Bills Receivable Account.
• Prepare Total Creditors Account.
• Prepare Bills Payable Account.
• Prepare Stock Account.
• Prepare Revenue Expenses Account.
• Prepare Revenue Income Account.
• Prepare Fixed Asset Account.
• Prepare Opening Statement of Affairs.
• Then prepare trading account, profit and loss account and balance sheet from the various information given.

Q.7 Explain how the following may be ascertained from incomplete records.

1. Opening capital and closing capital.
2. Credit sales and credit purchases.
3. Payments to creditors and collection from debtors.
4. Closing balance of cash.

Ans.

a) Opening capital can be ascertained by preparing a Statement of Affairs at the beginning of the accounting period.

Closing capital can be ascertained by preparing a Statement of Affairs at the end of the accounting period.

The difference between the opening and closing capital represents its increase or decrease which is to be adjusted for withdrawals made by the owner or any fresh capital introduced by him during the accounting period in order to arrive at the amount of profit or loss made during the period.

b) Credit purchases can be ascertained by preparing the total creditors account.

Credit sales can be ascertained from total debtors account, the sales returns should be deducted from gross credit sales to get net credit sales.

c) Payment to creditors and collection from debtors can be ascertained by preparing total creditors and total debtors account

d) Closing balance of cash can be ascertained from the cash book summary.

Q.8 Following information is given below prepare the statement of profit or loss:

• Capital at the end of the year: 5,00,000
• Capital in the beginning of the year: 7,50,000.
• Drawings made during the period: 3,75,000.
• Additional Capital introduced: 50,000.

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Q.9 Manveer started his business on April 01, 2016 with a capital of 4,50,000. On March 31, 2017 his position was as under:

• Cash: 99,000
• Bills receivable: 75,000
• Plant: 48,000
• Land & Building: 1,80,000
• Furniture: 50,000.

He owned 45,000 from his friend Susheel on that date. He withdrew 8,000 per month for his household purposes. Ascertain his profit or loss for this year ended March 31, 2017.

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Q.10 From the information given below ascertain the profit for the year:

• Capital at the beginning of the year: 70,000
• Additional capital introduced during the year: 17,500
• Stock: 59,500
• Sundry debtors: 25,900
• Business premises: 8,600
• Machinery: 2,100
• Sundry creditors: 33,400
• Drawings made during the year: 26,400

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Q.11 From the following information, Calculate Capital at the beginning:

• Capital at the end of the year: 4,00,000
• Drawings made during the year: 60,000
• Fresh capital introduce during the year: 1,00,000
• Profit of the current year: 80,000

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Note:
As per the solution, the opening capital should be of 2,80,000; but, the answer given in the book is 2,60,000.

Q.12 Following information is given below: calculate the closing capital:

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Q.13 Mrs. Anu started firm with a capital of 4,00,000 on 1^st October, 2016. She borrowed from her friends a sum of 1,00,000 @ 10% per annum (interest paid) for business and brought a further amount to capital 75,000 on March 31, 2017, her position was:

She withdrew 8,000 per month for the year. Calculate profit or loss for the year and show your working clearly.

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Q.14 Mr. Arnav does not keep proper records of his business he provided following information. You are required to prepare a statement showing the profit or loss for the year.

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Q.15 Mr. Akshat keeps his books on incomplete records following information is given below:

During the year he withdrew 45,000 and introduced 25,000 as further capital in the business compute the profit or loss of the business.

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Q.16 Gopal does not keep proper books of account. Following information is given below:

During the year he introduced 20,000 and withdrew 12,000 from the business. Prepare the statement of profit or loss on the basis of given information.

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Note: As per the solution, the profit earned for the year 2017 should be 37,500; whereas, in the text book, the profit earned is 53,500.

Q.17 Mr. Muneesh maintains his books of accounts from incomplete records. His books provide the information:

He withdrew 300 per month for personal expenses. He sold his investment of 16,000 at 2% premium and introduced that amount into business.

Ans.

Working Note:
Additional capital introduced during the year:
16,000 + 2% = 16,320
Because investment were sold at 2% profit and the same introduced in the business.

Q.18 Mr. Girdhari Lal does not keep full double entry records. His balance as on April 01, 2016 is as:

His position at the end of the year is:

He withdrew 500 per month out of which to spent 1,500 for business purpose. Prepare the statement of profit or loss.

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Q.19 Mr. Ashok does not keep his books properly. Following information is available from his books.

During the year Mr. Ashok sold his private car for 50,000 and invested this amount into the business. He withdrew from the business 1,500 per month up to October 31, 2016 and thereafter 4,500 per month as drawings.

You are required to prepare the statement of profit or loss and statement of affair as on March 31, 2017.

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Note: As per the solution, the loss incurred during the year 2017 is 60,900, whereas the loss given in the book shows 57,900.

Q.20 Krishna Kulkarni has not kept proper books of accounts prepare the statement of profit or loss for the year ending March 31, 2017 from the following information.

The following adjustments were made:

1. Krishna withdrew cash 5,000 per month for private use.
2. Depreciation @ 5% on car and furniture @ 10%.
3. Outstanding Rent 6,000.
4. Fresh Capital introduced during the year 30,000.

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Q.21 M/s Saniya Sports Equipment does not keep proper records. From the following information find out profit or loss and also prepare balance sheet for the year ended March 31, 2017:

Drawing 10,000 per month for personal use, fresh capital introduce during the year 2,00,000. A bad debts of 2,000 and a provision of 5% is to be made on debtors, outstanding salary 2,400, prepaid insurance 700, depreciation charged on furniture and machine @ 10% p.a.

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Note: As per the solution, the statement of affair with adjustment is 4,87,800; while, as per the book, the adjustment is 4,87,700.

Q.22 From the following information calculate the amount to be paid to creditors:

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Working Note:

Credit purchase = Total purchase – Cash purchase

Credit purchase = (8,97,000 – 1,40,000) = 7,57,000

Amount paid to Creditors = 4,40,175

Q.23 Find out the credit purchases from the following:

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Credit purchases for the year 2017 is 2,56,350.

Q.24 From the following information calculate total purchases:

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Total Purchases = Cash Purchase + Credit Purchases

Hence, Total Purchases will be:

1,29,000 + 2,01,500 = 3,30,500

Q.25 The following information is given:

Calculate credit purchases during the year.

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Q.26 From the following calculate the amount of bills accepted during the year.

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Bills accepted during the year is 1,18,000.

Q.27 Find out the amount of bills matured during the year on the basis of information given below:

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The amount of bills matured during the year is 38,000.

Q.28 Prepare the bills payable account from the following and find out missing figure if any:

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Opening Balance of creditors is 79,000

Q.29 Calculate the amount of bills receivable during the year.

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Bills receivable received from debtors is 1,60,000.

Q.30 Calculate the amount of bills receivable dishonoured from the following information:

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The amount of Bills Receivable dishonoured is 11,500.

Q.31 From the details given below. Find out the credit sales and total sales.

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Total Sales = Cash Sales + Credit Sales

Total Sales = 80,000 + 2,82,300 = 3,62,300

Q.32 From the following information, prepare the bills receivable account and total debtors account for the year ended March 31, 2017.

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Q.33 Prepare the suitable accounts and find out the missing figure if any:

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Note: As per solution, the missing figure in the bills receivable account is B/R dishonoured of 40,000. The credit sales is 6,21,000, however, the NCERT book shows a credit sales 5,16,000.

Q.34 Mrs. Bhavana keeps her books by Single Entry System. You are required to prepare final accounts of her business for the year ended March 31, 2017. Her records relating to cash receipts and cash payments for the above period showed the following particulars:

The following information is also available:

All her sales and purchases were on credit. Provide depreciation on plant and building by 10% and machinery by 5%. Make a provision for bad debts by 5%.

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Q.35 From the following information ascertain the opening balance of sundry debtors and closing balance of sundry creditors:

The rate of gross profit is 25% on selling price and out of the total sales 85,000 was for cash sales.

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Working Note:

Computation of Credit Sales:

Sales = Cost of goods sold + Gross Profit

Cost of goods sold = Opening stock + Purchases – Closing stock

= 30,000 + 2,95,000 – 25,000

= 3,00,000

When the cost of goods sold is 3,00,000.

Sales will be = 3,00,000 + 25% Gross profit

$\begin{array}{l}\text{Gross profit is calculated on sales hence to calculate it}\\ \text{on cost of goods sold, the formula will be:}\\ \text{= Cost of goods sold ×}\frac{\text{25}}{\text{100}\text{–}\text{25}}\\ \text{= 3,00,000 ×}\frac{\text{25}}{\text{75}}\\ \text{= 1,00,000}\\ \text{Total Sales = 3,00,000 + 1,00,000}\\ \text{= 4,00,000}\end{array}$

As we know that cash sales is 85,000. So credit sales will be: = 4,00,000 – 85,000 = 3,15,000