Students can Download 1st PUC Accountancy Chapter 11 Accounts from Incomplete Records Questions and Answers, Notes Pdf, 1st PUC Accountancy Question Bank with Answers helps you to revise the complete Karnataka State Board Syllabus and to clear all their doubts, score well in final exams.
Karnataka 1st PUC Accountancy Question Bank Chapter 11 Accounts from Incomplete Records
1st PUC Accountancy Accounts from Incomplete Records Text Book Questions and Answers
Short Questions and Answers
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 transactions.
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. They maintain books as per their needs. This system is also known as defective double entry system.
The preparation of financial statements is neither as easier nor as effective, as it is under double entry system. Consequently, accurate profit of loss is not possible to ascertain.
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 is 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:
Statement of Affairs | Balance Sheet |
It is less reliable as it is prepared from incomplete records | It is more reliable |
The objective is to estimate the balance in capital | The objective is to show the true financial position |
Omission of assets or liabilities cannot be discovered | Omission of assets or liabilities can be discovered |
Question 4.
What practical difficulties are encountered by a trader due to incompleteness of accounting records?
Answer:
The following are the difficulties that are encountered by a trader due to incompleteness of accounting records.
Accuracy of accounts: Arithmetical accuracy of accounts can not be ascertained, since proper records of accounts are not maintained. Consequently, Trial Balance cannot be prepared.
Encourages fraud: As the arithmetical accuracy cannot be determined; so, this encourages – fraud and provides sufficient scope for bluffing and carelessness.
Difficult to ascertain correct profit or loss: Since all expenses and income are not recorded, true profit or loss cannot be correctly ascertained.
Difficult to analyse the true financial position: As profit or loss cannot be ascertained easily, so the Balance Sheet cannot be easily prepared. Hence, the absence of Balance Sheet will not reflect the true financial position of the business.
Difficulty in comparison: Due to the incomplete records and non-availability of previous years’ data, comparison is not possible. By the same token, comparisons with other firms are also not possible.
Unacceptable to tax authorities: It does not reflect the true and acceptable presentation of expenses and revenues. Hence, these are not acceptable by the tax authorities.
Raising funds: Since analysis of solvency, profitability and liquidity of business cannot be done, it is difficult to raise fund ffdm outside.
Long Questions and Answers
Question 1.
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?
Answer:
A Statement of Affairs resembles Balance Sheet; however, it is not called a Balance Sheet. The statement of affairs is a Statement of Assets and Liabilities. The main difference between a Statement of Affairs and a Balance Sheet is that while the former is prepared on the basis of physical counts and improper source documents, the latter is prepared purely on the basis of ledger accounts.
Thus, the authentication and relevance of the latter is guaranteed. The excess of assets over liabilities (i.e., balancing figure) is denoted as the capital of the firm. The performa of the statement of affairs is presented below.
When liabilities are more than assets, then the balancing figure is denoted by Capital- Deficiency in the assets side of the statement of affairs.
When the assets’ balance exceeds liabilities’ balance, the balancing figure is denoted by Capital in the liabilities side of the statement of affairs.
For ascertaining profit or loss, if capital in the beginning is not given, then opening statement of affairs is prepared in order to calculate the capital in the beginning. Once the opening capital and closing capital is calculated, a Statement of Profit or Loss is prepared to determine the amount of profit earned or loss incurred during the accounting period.
Question 2.
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.
Answer:
The Profit and Loss Account and the Balance Sheet can be prepared from the incomplete book of accounts through Conversion Method. According to this method, incomplete records are converted into double entry records. In case of incomplete records, details of some transactions are easily available like cash sales, cash purchases, creditors, debtors; however, there are number of transactions, the details of which may not be available directly.
Yet, these details can be found out indirectly or logically. Some of the important items that are vital for preparing Balance Sheet are given below.
- Opening Capital
- ClosingCapital
- Credit Purchases
- Cash Purchases
- Credit Sales
- Cash Sales
- Payment from Debtors
- Payment to Creditors
- Opening Stock
- Closing Stock
Below given are the steps included in the conversion method in a chronological order.
- If opening capital is not given, then the first step is to prepare opening Statement of Affairs that gives the Opening Capital.
- The second step is to prepare Cash Book that gives the opening or the closing cash and bank balance.
- The next step is to prepare Total Debtors Account. It is prepared in order to find out one of the missing figures, such ascredit sales, opening debtors, closing debtors and cash received from debtors.
- The subsequent step is to prepare Total Creditors Account to ascertain one of the missing figures, such as credit sales, opening creditors, closing creditors and cash paid to the creditors.
- The last step is to prepare final accounts. On the basis of the missing figures ascertained in each of the above steps, along with other mentioned information, Trading and Profit and Loss Account and Balance Sheet can be prepared.
Question 3.
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.
Answer:
1. Opening capital and closing capital: Opening capital can be ascertained by preparing opening statement of affairs at the beginning of the accounting period and closing capital can be ascertained by preparing closing Statement of Affairs at the end of the accounting period.
When liabilities are more than assets, capital appears in assets side, as it is balancing figure.
When the assets’ balance exceeds liabilities’ balance, the balancing figure is denoted by capital in the Liabilities side of the Statement of Affairs.
2. Credit Sales and Credit Purchases: Credit sales are ascertained as the balancing figure of the Total Debtors Account and Credit Purchases are ascertained as the balancing figure of the Total Creditors Account.
1st PUC Accountancy Accounts from Incomplete Records Numerical Questions and Answers
Question 1.
Following information is given below prepare the statement of profit or loss:
Answer:
Question 2.
Manveer started his business on January 01, 2013 with a capital of Rs 4,50,000. On December 31, 2013 his position was as under:
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, 2013.
Answer:
Question 3.
From the information given below ascertain the profit for the year:
Answer:
Question 4.
From the following information, calculate capital at the beginning:
Answer:
Capital in the beginning = Capital at the end + Drawings- (Fresh Capital Introduced + Profit)
= 4,00,000 + 60,000 – (1,00,000 + 80,000)
= Rs 2,80,000
Note: As per the solution, the profit should be of Rs 2,80,000; but, the answer given in the book is Rs 2,60,000.
Question 5.
Following information is given below: calculate the closing capital
Calculation of profit or loss and ascertainment of statement of affairs at the end of the year (Opening Balance is given)
Answer:
Capital on December 31, 2013 (Closing) is Rs 20,000
Question 6.
Mrs Anu started firm with a capital of Rs 4,00,000 on 1st July 2013. She borrowed from her friends a sum of Rs 1,00,000 @ 10% per annum (interest paid) for business and brought a further amount to capital Rs 75,000 on Dec. 31, 2013, her position was :
He withdrew Rs 8,000 per month, for the year. Calculate profit or loss for the year and show your working clearly.
Answer:
Question 7.
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.
Ascertainment of statement of affairs at the beginning añd at the end of the year and calculation of profit or loss.
Answer:
Question 8.
Mr. Akshat keeps his books on incomplete records following information is given below:
During the year he withdrew Rs 45,000 and introduced Rs 25,000 as further capital in the husiness compute the profit or loss of the business.
Answer:
Question 9.
Gopal does not keep proper books of account. Following information is given below:
During the year he introduced Rs 20,000 and withdrew Rs 12,000 from the business. Prepare the statement of profit or loss on the basis of given information
Answer:
Note: As per the solution, the profit during the year should be Rs 37,500; whereas, the profit given in the book is Rs 53,500.
Question 10.
Mr. Muneesh maintains his books of accounts from incomplete records. His books provide the information:
He withdrew Rs 300 per month for personal expenses. He sold his investment of Rs 16,000 at 2% premium and introduced that amount into business.
Answer:
Working Note:
Additional Capital Introduced = 16,000 × \(\frac { 102 }{ 100 }\)
= 16,320
Question 11.
Mr. Girdhari Lai does not keep full double entry records. His balance as on January 01, 2013 is as.
His position at the end of the year is:
He Withdrew Rs 500 per month out of which to spent Rs 1,500 for business purpose. Prepare the statement of profit or loss.
Answer:
Question 12.
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 Rs 50,000 and invested this amount into the business. He withdrew from the business Rs 1,500 per month upto July 31, 2013 and thereafter Rs 4,500 per month as drawings. You are re¬quired to prepare the statement of profit or loss and statement of affair as on December 31, 2013.
Answer:
Question 13.
Krishna Kulkarni has not kept proper books of accounts prepare the statement of profit or loss for the year ending December 31, 2013 from the following information:
The following adjustments were made:
(a) Krishna withdrew cash Rs 5,000 per month for private use.
(b) Depreciation @ 5% on car and furniture @10%.
(c) Outstanding Rent Rs 6,000.
(d) Fresh Capital introduced during the year Rs 30,000.
Answer:
Question 14.
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 December 31, 2013
Drawing Rs 10,000 p.m. for personal use, fresh capital introduce during the year Rs 2,00,000. A bad debts of Rs 2,000 and a provision of 5% is to be made on debtors outstanding salary Rs 2,400, prepaid insurance Rs 700, depreciation charged on furniture and machine @ 10% p.a.
Answer:
Question 15.
From the following information calculate the amount to be paid to creditors:
Answer:
Amount paid to Creditors is Rs 4,40,175.
Question 16.
Find out the credit purchases from the following:
Answer:
Credit Purchases Rs 56,350
Question 17.
From the following information calculate total purchases.
Answer:
Total Purchases = Cash Purchases + Credit Purchases (as per Creditors Account)
= 1,29,000 + 2,01,500
= Rs 3,30,500
Question 18.
The following information is given
Answer:
Question 19.
From the following, calculate the amount of bills accepted during the year.
Answer:
Question 20.
Find out the amount of bills matured during the yeair on the basis of information given below;
Answer:
Bill Payable matured during the year is Rs 38,000.
Question 21.
Prepare the bills payable account from the following and find out missing figure any:
Answer:
Bills payable discharged is Rs 88,000 and the opening balance of creditors is Rs 79,000.
Question 22.
Calculate the amount of bills receivable during the year.
Answer:
Bills receivable received from Debtors Rs 1,60,000.
Question 23.
Calculate the amount of bills receivable dishonoured from the following information.
Answer:
Bills Receivable dishonoured is Rs 11,500.
Question 24.
From the details given below, find out the credit sales and total sales.
Answer:
Credit sales is Rs 2,82,300
Total Sales = Cash Sales + Credit Sales
= 80,000 + 2,82,300
= Rs 3,62,300
Question 25.
From the following information, prepare the bills receivable account and total debtors account for the year ended December 31, 2013.
Answer:
The missing figure in the bills receivable account @ B/R received from debtors Rs 1,61,000 and the missing figure in the debtors account @closing balance is Rs 3,01,000.
Question 26.
Prepare the suitable accounts and find out the missing figure if any.
Answer:
Note: As per solution, the missing figure in the bills receivable account is B/R dishonoured of Rs 40,000. The missing figure in the debtors account is the credit sales of Rs 6,21,000, However, the NCERT book shows a credit sales Rs 5,16,000.
In order to match our answer with that of the book, B/R received from the customers is not shown in the debtors account.
Question 27.
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 Rs 85,000 was for cash sales. (Hint: Total sales = 4,00,000 = 3,00,000 × 100 × \(\frac { 100 }{ 75 }\))
Answer:
Opening balance of debtors is Rs 54,000 and the closing balance of creditors is Rs 1,78,500.
Working Notes:
Total Sales = Cash Sales + Credit Sales
Total Sales = Cost of Goods Sold + Gross Profit Cost of Goods Sold
= Opening Stock + Purchases @ Closing Stock
= 30,000 + 2,95,000 @25,000
= Rs 3,00,000
Let sales be 100%
Sales = Cost of Goods sold + Gross Profit
Or,
100 = Cost of Goods sold + 25%
Cost of Goods Sold = 100% – 25% = 75%
Sales = Cost of Goods Sold + Gross Profit
= 3,00,000 + 1,00,000
= Rs 4,00,000
= Rs 3,15,000 + 85,000
= Rs 3,15,000
Note: Here, it has been assumed that all purchases were made on credit.
Question 28.
Mrs Bhavana keeps his books by Single Entry System. You.re required to prepare final accounts of her business for the year ended December 31, 2013. 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%.
Answer: