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Financial Accounting Notes

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Financial Accounting Notes For Class XI.

  • 1
    ACCOUNTING FROM INCOMPLETE RECORDS Single entry system: under this system, the cash book and personal a/cs of debtors and creditors are maintained ; real and nominal accounts are not, since both aspects are not recorded , the system is known as accounts from incomplete records. DEFINITION Kohler defines single entry system as ," a system of book keeping in which as a rule only records of cash and personal a/cs are maintained , it is always incomplete double entry varying with circumstances. FEATURES OF SINGLE ENTRY SYSTEM 1. 2. 3. 4. 5. 6. Suitability: no. Of transaction is less. No uniformity: Maintainance of personal a/cs : Maintainance of cash book: Dependence on original vouchers: Difficulty in preparation of fin a/cs: ADVANTAGES OF SINGLE ENTRY SYSTEM 1. 2. 3. 4. 5. Simple Less expensice Suitable for small business No need of expert knowledge Easy to ascertain p&l DISADVANTAGES OF SINGLE ENTRY SYSTEM Airthmetic accuracy No control on assets Correct p&l cannot determined Financial position of business No internal check Difficult to asceetain the value of business Incomplete and unscientific system Comparative study is difficult
  • 2
    METHODS OF ASCERTAINING PROFIT UNDER SINGLE ENTRY SYSTEM Statement of affairs method Conversion method Statement of affairs / net worth method: It is a statement of assets and liabilities . diffrence between the two sided taken as capital. If capital at the end exceeds than the beginging of year it is taken as profit. PROFIT: CAPITAL AT THE END + DRAWINGS - ADDITIONAL CAPITAL INTRODUCED -CAPITAL IN THE BEGINING Conversion method: Under this method certain information (sales , purchase and operating expenses ) is not available form incomplete records. It means converting a/cs from single entry to double entry system.

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