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Class 11
Accountancy
Accounts from Incomplete Records
lsquo is it possible to prepare the profit and lo...

Question:
‘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 a 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,

a. Opening capital
b. Closing capital
c. Credit purchases
d. Cash purchases
e. Credit sales
f. Cash sales
g. Payment from debtors
h. Payment to creditors
i. Opening stock
j. Closing stock

Below are given are the steps included in the conversion method in a chronological order:

a. If opening capital is not given, then the first step is to prepare an opening statement of affairs that gives the opening capital.

b. The second step is to prepare a cash book that gives the opening or the closing cash and bank balancer.

c. The next step is to prepare a total debtors account. It is prepared in order to find one of the missing figures, such as credit sales, opening debtors, closing debtors and cash received from debtors.

d. The subsequent step is to prepare a total creditors account to ascertain one of the missing figures, such as credit sales, opening creditors, closing creditors and cash paid to the creditors.

e. 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.

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Popular questions of class 11 Accountancy

Mr. Sunrise started a business for buying and selling of stationery with ₹ 5,00,000 as an initial investment. Of which he paid ₹ 1,00,000 for furniture, ₹ 2,00,000 for buying stationery items. He employed a sales person and clerk. At the end of the month he paid ₹ 5,000 as their salaries. Out of the stationery bought he sold some stationery for ₹ 1,50,000 for cash and some other stationery for ₹ 1,00,000 on credit basis to Mr. Ravi. Subsequently, he bought stationery items of ₹ 1,50,000 from Mr. Peace. In the first week of next month there was a fire accident and he lost ₹ 30,000 worth of stationery. A part of the machinery, which cost ₹ 40,000, was sold for ₹ 45,000.

From the above, answer the following :
1. What is the amount of capital with which Mr. Sunrise started business?
2. What are the fixed assets he bought?
3. What is the value of the goods purchased?
4. Who is the creditor and state the amount payable to him?
5. What are the expenses?
6. What is the gain he earned?
7. What is the loss he incurred?
8. Who is the debtor? What is the amount receivable from him?
9. What is the total amount of expenses and losses incurred?
10. Determine if the following are assets, liabilities, revenues, expenses or none of the these: sales, debtors, creditors, salary to manager, discount to debtors, drawings by the owner.

Q: Explain the qualitative characteristics of accounting information.

Q: Describe the role of accounting in the modern world.

Q: What do you mean by an asset and what are different types of assets?

Differentiate between source documents and vouchers.

Complete the following sentences with appropriate words:
(a) Information in financial reports is based on .....................
(b) Internal users are the ..................... of the business entity.
(c) A ..................... would most likely use an entities financial report to determine whether or not the business entity is eligible for a loan.
(d) The Internet has assisted in decreasing the ..................... in issuing financial reports to users.
(e) ..................... users are groups outside the business entity, who uses the information to make decisions about the business entity.
(f) Information is said to be relevent if it is ......................
(g) The process of accounting starts with ............ and ends with ............
(h) Accounting measures the business transactions in terms of ............ units.
(i) Identified and measured economic events should be recording in ............ order.

What is a journal? Give a specimen of journal showing at least five entries.

Define accounting and state its objectives.

Enumerate informational needs of management.

Complete the following work sheet:
(i) If a firm believes that some of its debtors may ′default′, it should act on this by making sure that all possible losses are recorded in the books. This is an example of the ___________ concept.
(ii) The fact that a business is separate and distinguishable from its owner is best exemplified by the ___________ concept.
(iii) Everything a firm owns, it also owns out to somebody. This co-incidence is explained by the ___________ concept.
(iv) The ___________ concept states that if straight line method of depreciation is used in one year, then it should also be used in the next year.
(v) A firm may hold stock which is heavily in demand. Consequently, the market value of this stock may be increased. Normal accounting procedure is to ignore this because of the ___________.
(vi) If a firm receives an order for goods, it would not be included in the sales figure owing to the ___________.
(vii) The management of a firm is remarkably incompetent, but the firms accountants can not take this into account while preparing book of accounts because of ________ concept.

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Recently Viewed Questions of Class 11 Accountancy

Briefly state how the cash book is both journal and a ledger.

Choose the correct option in the following questions :

The financial statements consist of:
(i) Trial balance
(ii) Profit and loss account
(iii) Balance sheet
(iv) (i) & (iii)
(v) (ii) & (iii)

Goods purchased on cash are recorded in the :
(i) Purchases (journal) book
(ii) Sales (journal) book
(iii) Cash book
(iv) Purchases return (journal) book

What is contra entry? How can you deal this entry while preparing double column cash book?

A bill of exchange must contain “an unconditional promise to pay” Do you agree with a statement?

State the title of the accounts affected, type of account and the account to be debited and account to be credited :
₹
1. Bhanu commenced business with cash 1,00,000
2. Purchased goods on credit from Ramesh 40,000
3. Sold goods for cash 30,000
4. Paid salaries 3,000
5. Furniture purchased for cash 10,000
6. Borrowed from bank 50,000
7. Sold goods to Sarita 10,000
8. Cash paid to Ramesh on account 20,000
9. Rent paid 1,500

Name the parties to a promissory note.

Are debits or credits listed first in journal entries? Are debits or credits indented?

What is meant by dishonour of a bill of exchange?

State whether each of the following statements is True or False
1. Passbook is the statement of account of the customer maintained by the bank.
2. A business firm periodically prepares a bank reconciliation statement to reconcile the bank balance as per the cash book with the passbook as these two show different balances for various reasons.
3. Cheques issued but not presented for payment will reduce the balance as per the passbook.
4. Cheques deposited but not collected will result in increasing the balance of the cash book when compared to passbook.
5. Overdraft as per the passbook is less than the overdraft as per cash book when there are cheques deposited but not collected by the banker.
6. The debit balance of the bank account as per the cash book should be equal to the credit balance of the account of the business in the books of the bank.
7. Favourable bank balance as per the cash book will be less than the bank passbook balance when there are unpresented cheques for payment.
8. Direct collections received by the bank on behalf of the customers would increase the balance as per the bank passbook when compared to the balance as per the cash book.
9. When payments made by the bank as per the standing instructions of the customer, the balance in the passbook will be more when compared to the cash book.

Question:
‘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.

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Question: ‘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.

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Popular questions of class 11 Accountancy

Recently Viewed Questions of Class 11 Accountancy

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NCERT Solutions

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Question:
‘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.