3 Marks Question

Question 13 Marks

Why the statement of assets and liabilities prepared under Single Entry System at the end of the accounting period is called a Statement of Affairs instead of Balance Sheet?

Answer

Although Statement of Affairs, like Balance Sheet, shows assets and liabilities yet it is not a Balance Sheet. It is so because the values of the assets and liabilities, shown in the Statement of Affairs are merely the result of estimates made by the owner and no Ledger Accounts exist for them. Since, these amounts are not drawn from the accounts, they cannot strictly be called balances and their depiction as liabilities and assets in a Balance Sheet.

	₹
Credit purchases	2,40,000
Cash purchases	50,000
payment to creditors	2,10,000
Discount allowed by them	5,000
Bills Payable accepted	30,000
Creditors in the beginning of the year	90,000

	₹
Bills accepted,	1,05,000
Discount received,	17,000
Purchases returns,	9,000
Return inwards,	12,000
Cash paid to accounts payable,	50,000
Bills receivable endorsed to creditor,	45,000
Bills dishonoured,	17,000
Bad debts,	14,000
Balance of accounts payable (closing),	85,000
Credit purchases,	2,15,000

	₹
Bills payable dishonoured,	37,000
Closing balance of Bills payable,	85,000
Opening balance of Bills payable,	70,000
Bills payable accepted,	90,000
Cheque dishonoured,	23,000

	₹
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

Capital in the beginning	=	Capital at the end + Drawings - (Fresh Capital Introduced + Profit)
	=	4,00,000 + 60,000 – (1,00,000 + 80,000)
	=	₹ 2,80,000

	₹
Opening Capital	1,00,000
Closing Capital	1,25,000
Drawings during the year	30,000
Capital added during the year	37,500

	₹
Opening balance of bills receivable.	1,20,000
Bills collected (honoured).	1,85,000
Bills receivable endorsed.	22,800
Closing balance of bills receivable.	50,700
Bills receivable received.	1,50,000

	₹
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

	₹
Bills payable as on April 01, 2016.	1,80,000
Bills payable as on March 31, 2017.	2,20,000
Bills payable dishonoured during the year.	28,000
Bills payable honoured during the year.	50,000

	₹
Sales	80,000
Purchases	60,000
Stock at the end	8,000
Loss on Cost	$\frac{1}{6}$

S.No.	Basis	Balance Sheet	Statement of Affairs
1.	Objective	The main objective of preparing Balance Sheet is to know about the financial position of the business.	The main objective of preparing Statement of Affairs is to know about capital at a point of time.
2.	Accounting System	Balance Sheet is prepared when accounts are maintained under Double Entry System.	Statement of Affairs is prepared when accounts are maintained under Single Entry System.
3.	Accounts and Information	This is prepared exclusively on the basis of ledger accounts.	In view of incomplete accounts, its preparation is based on limited accounts, calculations, estimates and other information.

Total Purchases	= Cash Purchases + Credit Purchases (as per Creditors Account)
	= 1,29,000 + 2,01,500
	= ₹ 3,30,500

	₹
Capital on 1st April, 2018	15,200
Capital on 31st March, 2019	16,900
Drawings made during the year	4,800
Capital introduced on 1st August, 2018	2,000

	₹
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

	₹
Opening creditors	60,000
Cash paid to creditors	30,000
Closing creditors	36,000
Returns Inward	13,000
Bill matured	27,000
Bill dishonoured	8000
Purchases return	12000
Discount allowed	5,000

	₹
Creditors April 01, 2016	30,000
Creditors March 31, 2017	20,000
Opening balance of Bills payable	25,000
Closing balance of Bills payable	35,000
Cash paid to creditors	1,51,000
Bills discharged	44,500
Cash purchases	1,29,000
Return outwards	6,000

	₹
Opening balance of bills receivable.	75,000
Bill dishonoured.	25,000
Bills collected (honoured)	1,30,000
Bills receivable endorsed to creditors.	15,000
Closing balance of bills receivable.	65,000

	₹
Stock in the beginning	20,000
Cash Sales	60,000
Credit Sales	40,000
Purchases	70,000
Rate of Gross Profit on Cost	1/3

	₹
Opening debtors.	45,000
Closing debtors.	56,000
Discount allowed.	2,500
Sales returns.	8,500
Irrecoverable amount.	4,000
Bills receivables received.	12,000
Bills receivable dishonoured.	3,000
Cheque dishonoured.	7,700
Cash sales.	80,000
Cash received from debtors.	2,30,000
Cheque received from debtors.	25,000

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

	₹
Cash,	99,000
Bills receivable,	75,000
Plant,	48,000
Land and Building,	1,80,000
Furniture,	50,000

Opening Capital - ₹ 1,30,000	Drawings during the year ₹ 50,000
Closing Capital - ₹ 2,00,000	Profit made during the year ₹ 1,00,000

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