Accounting for Incomplete Records

58807 WordsSep 1, 2010236 Pages
Advance Financial Accounting (FIN-611) VU LESSON # 1 ACCOUNTING FOR INCOMPLETE RECORDS 1. Introduction This topic is also known as Single Entry System of Accounting. In this chapter we will learn how an accountant prepares financial statements of those organizations which are not keeping up proper double entry book keeping system of accounting. From accounting system stand point, business organizations can be classified into three broad categories: 1.1 Small scale business entities These consist of very small sized business entities like; barber shop, mutton shop, washer man, general store, electrician etc. etc. 1.2 Medium scale business entities These consist of medium sized business entities like; drycleaner, motor car dealers,…show more content…
Name of the Organization Statement of Profit or Loss For the year ended December 31, 20x7 Rs. Owner’s Equity (closing balance) *** Add Drawings (during the year) *** Less Owner’s Equity (opening balance) (**) Fresh Capital (introduced during the year) (**) Net profit (for the year) [balancing figure] *** 2.3 Statement of Affairs From examination stand point, Drawings and Fresh capital will be given in the questions but often the students will be required to calculate the opening and closing balances of Owner’s Equity as these will not be given in the question as a single amount. (C) Copyright Virtual University of Pakistan 2 Advance Financial Accounting (FIN-611) VU If you have not yet forgotten the basic accounting equation then Statement of Affairs is very simple to understand. What you learned in the basic accounting equation was that: ASSETS = OWNER’S EQUITY + LIABILITIES So to calculate the balance of owner’s equity the equation will be reversed like: OWNER’S EQUITY = ASSETS + LIABILITIES Name of the Organization Statement of Affairs As on Opening and Closing Date Opening Rs. ASSETS Furniture and fixture (net of depreciations) Stocks Debtors (net of provisions) Prepaid expenses Bank Cash LIABILITIES Loan Creditors Accrued expenses OWNER’S EQUITY (Net Assets) *** *** *** *** *** *** Closing Rs. *** *** *** ***
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