Account 3 Marks Question

Total Sales = Cash Sales + Credit Sales
Total Sales = 1,05,000 + 3,80,000 = 4,85,000

Single Entry System is an incomplete and insufficient system of information, hence it has the following disadvantages:

1. Arithmetical Accuracy cannot be Proved: Trial Balance cannot be prepared hence, arithmetical accuracy of books cannot be proved or tested. Chances of error mischief or fraud remaining undetected are high.
2. No Control on Assets: Since assets accounts are not maintained, it is difficult to keep full control, in order to avoid misappropriations of assets.
3. Correct Profit or Loss cannot be Determined: Trading and Profit and Loss Account cannot be prepared hence, correct profit earned or loss incurred during the accounting period cannot be determined.

Differnce between Balance Sheet and Statement of Affairs

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.

A Statement of Affairs is a statement of assets and liabilities. Difference between the amounts of the two sides is taken as capital. Under the Single Entry System, it is necessary to prepare Statement of Affairs at the end of the year and also in the beginning of the year, if not already prepared to determine profit. Statement of Affairs like Balance Sheet, has two sides-right-hand side for Assets and left-hand side for Liabilities. The difference between the total of assets and liabilities is capital.
Capital = Total Assets – Liabilities

Rate of Gross Profit (on cost) = 25%
Rate of Gross Profit (on sales) = 20%
Gross Profit = 20% of 1,20,000 = 24,000
Gross Profit = Net Sales - Cost of Goods Sold
24,000 = 1,20,000 - Cost of Goods Sold
Cost of Goods Sold = 1,20,000 - 24,000 = ₹ 96,000
Cost of Goods Sold = Opening Stock + Purchases + Direct Expenses - Closing Stock
96,000 = 16,000 + 93,000 + 20,000 - Closing Stock
Closing Stock = 16,000 + 93,000 + 20,000 - 96,000 = ₹ 33,000

Closing Capital + Drawings - Additional Capital - Opening Capital = Profits
Closing Capital = Opening Capital + Additional Capital + Profits - Drawings
Closing Capital = 90,000 + 40,000 + 25,000 - 17,000
Closing Capital = ₹ 1,38,000

Rate of Gross Profit (on sales) = 40%
Gross Profit = 40% of (2,05,000 - 5,000) = 80,000
Gross Profit = Net Sales - Cost of Goods Sold
80,000 = 2,00,000 - Cost of Goods Sold
Cost of Goods Sold = 2,00,000 - 80,000 = ₹ 1,20,000
Cost of Goods Sold = Opening Stock + Purchases + Direct Expenses - Closing Stock
1,20,000 = Opening Stock + (1,24,000 - 4,000) + 8,000 - 36,000
Opening Stock = 1,20,000 - 1,20,000 - 8,000 + 36,000 = ₹ 28,000