Single Entry System/Accounts From Incomplete Records:
Define and explain single entry system.
What are the limitations of single entry system.
How profit is calculated under single entry system of accounting.
Definition and Explanation of Single Entry System:
It is difficult to define single entry system because, in fact, there exists no system like single entry system. Broadly speaking, it is a defective double entry system. Any system that falls short of complete double entry method is called single entry system. Click here to read full article.
Defects/Limitations/Disadvantages of Single Entry System
Ascertainment of Profit and Loss:
Statement of Affairs – First Method:
Correct final accounts of a business can be prepared in the records are maintained under the double entry system . How every where the record is incomplete, and it is not all possible to complete it by double entry, in such cases the final accounts can be only approximately prepared by means of a statement of affairs. In appearance the statement of affairs is similar to a balance sheet. Click here to read full article.
Difference Between Statement of Affairs and Balance Sheet:
As real or property accounts are not maintained and also because a capital account does not exist under the single entry system, a balance sheet cannot be prepares in the same way as is done under the double entry system. However, in order to have an idea about the financial position on a particular date information concerning the available assets and liabilities is gathered and a statement is prepared setting in it assets and liabilities on the date; this statement is called a statement of affairs. The assets and liabilities are set out in the form of a balance sheet. The excess of assets over liabilities is shown as capital. Click here to read full article
Conversion into Double Entry System:
Conversion of books from single entry system to double entry system is possible either with retrospective (i.e., on and from a date before the date of conversion arrangements) or with a prospective effect (i.e., on and from the date on which arrangements are made for conversion). Click here to read full article.
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