# Single Entry System

Single Entry System or Accounting from Incomplete Records,  is a method of accounting , in which , unlike the Double Entry System of Accounting, both the aspects of a transaction , are not recorded .  In  a Single entry system,  transactions relating to Cash Book, Personal Account of Debtors & Personal Account of Creditors are maintained.

### What is the definition of Single Entry ?

Kohler defines Single Entry System as “A system of bookkeeping in which as a rule only records of cash and of personal accounts are maintained, it is always incomplete double entry varying with the circumstances”.

How is Profit Calculated under the Single Entry System ?

The Profits/losses under Single Entry System are obtained by following the Statement of Affairs Method.

What is a Statement of Affairs?

The Statement of Affairs is similar to a Balance Sheet. All the assets are recorded on the right side and all liabilities are recorded on the left side. The difference between the value of all assets , and the value of all the  liabilities   taken in the Statement of Affairs is known as Capital.

Capital = Assets – Liabilities

Method for Calculating profit under the Single Entry System :  –

Step 1 – Prepare Statement of Affairs at the beginning of the year , as well as at the end of the year ;

Step 2 : – Compute the opening capital and closing capital as per the Statement of Affairs

Step 3 – If the capital at the end of the year is more as compared to the capital at the beginning , then the difference between the opening capital and closing capital  is a profit . However, if the capital at the beginning is more when  compared to the capital at the end,  then the difference between the opening capital and closing capital  is  lost during the year .

#### Single Entry System – Calculation of Total Assets

Question 1:

From the following information, calculate the total assets of the business :
Capital = 10,00,000
Creditors = 5,00,000
Revenue earned during the period = 7,50,000
Expenses incurred during the period = 4,00,000
Value of unsold stock = 2,00,000

Explanation:

Total Assets = Liabilities + Capital + Profit
= 5,00,000 + 10,00,000 + 3,50,000
= 18,50,000

Working Notes :

(i) Liabilities = Creditors
= 5,00,000

(ii) Profit = Revenue earned during the period – Expenses incurred during the period
= 7,50,000 – 4,00,000
= 3,50,000

#### Single Entry System – Calculation of Closing Capital & Profits Earned

Question 2:

B commenced his business on April 1 , 2019 with a capital of Rs. 20000 . On March 31 , 2020 his assets were Rs. 60000 and liabilities were Rs. 20000 . Find out his closing capital and profits earned during the year.

Explanation:

Total Assets = Capital + Liabilities
60,000 = Capital + 20,000

Closing Capital = 60,000 – 20,000
= 40,000

Profit = Closing Capital – Opening Capital
= 40,000 – 20,000
= 20,000

#### Single Entry System – Calculation of Capital on the basis of Assets and Liabilities

Question 3:

A has the following assets and liabilities as on March 31 , 2020 . Ascertain his capital.
Cash = 30,000 Rs.
Bank = 40,000 Rs.
Debtors = 18,000 Rs.
Creditors = 22,000 Rs.
Plant and Machinery = 80,000 Rs.
Building = 2,00,000 Rs.
Furniture = 24,000 Rs.
Bills Receivable = 56,500 Rs.
Bills Payable = 23,500 Rs

Explanation:

Assets = Liabilities + Capital
Capital = Assets – Liabilities
= 4,48,500 – 45,500
= 4,03,000

Working Note : –

(i) Assets = Cash + Bank + Debtors + Plant and Machinery + Building + Furniture + Bills Receivable
= 30,000 + 40,000 + 18,000 + 80,000 + 2,00,000 + 24,000 + 56,500
= 4,48,500

(ii) Liabilities = Creditors + Bills Payable
= 22,000 + 23,500
= 45,500

#### Calculation of Total Equity

Question 4:

Calculate the total equity if :
(i) Owner’s Equity in the beginning is Rs. 40,000
(ii) Equity of creditors at the end is Rs. 55,000
(iii) Revenue during the period is Rs. 75,000
(iv) Expenses during the same period are Rs. 65,000
Also calculate the amount of owner’s equity at the end ?

Explanation:

Total Equity = Owner’s Equity + Creditor’s Equity
= 50,000 + 55,000
= 1,05,000

Owner’s Equity at the end = 50,000

Working Notes : –
Owner’s Equity = Opening Owner’s Equity + Revenue – Expenses
= 40,000 + 75,000 – 65,000
= 50,000

#### Single Entry System – Calculation of Opening Capital

Question 5:

On March 31 , 2020 , the total assets and external liabilities were Rs. 100000 and Rs. 4000 respectively. During the year, the proprietor had introduced additional capital of Rs. 11000 and withdrawn Rs. 7000 for personal use. He made a profit of Rs. 15000 during the year. Calculate the capital as on April 1 , 2019 .

Explanation:

Closing Capital = Closing Assets – Closing External Liabilities
Closing Capital = 1,00,000 – 4,000
= 96,000

Opening Capital = Closing Capital + Drawings – Additional Capital – Profits
Opening Capital = 96,000 + 7,000 – 11,000 – 15,000
= 77,000

#### Calculation of Profit when Opening & Closing Capital is given

Question 6:

Capital at the beginning of the year Rs. 14,000
Capital at the end of the year Rs. 31,000
Drawings made during the year Rs. 12,000
Capital introduced during the year Rs. 5,000

You are required to ascertain the profit and loss made during the year ?

Explanation:

Profit or loss made during the year = Closing capital (+) Drawings (-) Opening capital (-) Additional capital introduced during the year
31,000 (+) 12,000 (-) 14,000 (-) 5,000
24,000

#### Single Entry System – Calculation of Profit when Additional Capital introduced through funds from sale of investment

Question 7:

Capital at the beginning of the year Rs. 1,14,000
Capital at the end of the year Rs. 1,09,000
Drawings made during the year Rs. 40,000
During the year, the owner sold an investment of Rs. 25,000 at a premium of 2 % and that money was brought into the business

You are required to ascertain the profit and loss made during the year ?

Explanation:

Profit or loss made during the year = Closing capital (+) Drawings (-) Opening capital (-) Additional capital introduced during the year
= 1,09,000 (+) 40,000 (-) 1,14,000 (-) 25,500
= 9,500

Working note : –  1
Additional capital introduced = Value of investment sold during the year (+) Premium on sale of investment
25,000 (+) 25,000 x 2%
25,000 (+) 500
25,500

#### Single Entry System – Closing Capital when profit is given

Question 8:

From the following information you are required to ascertain Closing Capital ?

Capital at the beginning of the year Rs. 1,20,000
Profit earned during the year Rs. 30,000
Drawings made during the year Rs. 45,000
During the year, the owner sold an investment of Rs. 40,000 at a premium of 5 % and that money was brought into the business .

Explanation:

Profit or loss made during the year = Closing capital (+) Drawings (-) Opening capital (-) Additional capital introduced during the year
30,000 = Closing capital (+) 45,000 (-) 1,20,000 (-) 42,000
Closing capital = 30,000 (-) 45,000 + 1,20,000 + 42,000
Closing capital = 1,47,000

Working note: 1

Additional capital introduced = Value of investment sold during the year (+) Premium on sale of investment
40,000 (+) 4,0000 x 5%
40,000 (+) 2,000
42,000

#### Single Entry System – Closing Capital when Assets & Liabilities are given

Question 9:

From the following information you are required to ascertain Capital at the end of the year.

Capital at the beginning of the year Rs. 10,000
Loan of Rs. 5,000 was taken at the beginning of the year @ 5 % P.a.
Drawings made during the year Rs. 1,500
At the end of the year the position of Assets and liabilities wasas under
Cash 1,000
Stock 10,000
Debtors 5,000
Creditors 3,000

Explanation:

Closing capital = Cash (+) Stock (+) Debtors (-) Creditors (-) Loan (-) Interest on Loan
Closing capital = 1,000 (+) 10,000 (+) 5,000 (-) 3,000 (-) 5,000 (-) 250
Closing capital = 7,750

Working note: 1
Interest on Loan = Loan Amount x Rate of interest
5,000 x 5 %
250

Note: Since loan was taken at the beginning of the year therefore interest has been calculated for full year