Accountancy · Chapter 17
Study notes aligned to the official NEB syllabus.
Single entry system is an incomplete system of accounting which does not record both the aspects of financial transactions of the business. It is the system which has no fixed set of rules to record the financial transactions of the business.
According to the Kohler Dictionary for Accountants: "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 the circumstances."
Statement of affairs is a statement of capital, liabilities and assets. Statement of affairs is prepared under the single entry system in order to find out the amount of opening or closing capital of the business.
Format (the recurring format used across the source's worked problems; a general layout, no specific figures):
| Liabilities | Amount | Assets | Amount |
|---|---|---|---|
| Creditors, loans, outstanding/expenses payable, bank overdraft, etc. | xx | Cash, bank balance, stock/inventory, debtors, furniture, machinery (less depreciation), bills receivable, etc. | xx |
| Capital (balancing figure) | xx | ||
| Total | xx | Total | xx |
Capital is found as the balancing figure: Capital = Total Assets minus Total Liabilities (other than capital).
(Note: the source's own blank "Format" table for the closing statement of affairs came through the OCR as an empty grid with no readable headings or figures, so it is not reproduced separately here; the layout above is the one that is actually visible, repeated consistently, across the worked problems that follow it.)
Under the single entry system, profit or loss for the year is ascertained by comparing the capital at the beginning and the capital at the end of the year (after adjusting for drawings and additional capital introduced), since a complete Profit and Loss Account cannot be prepared without full double entry records.
Format (as given in the source, with "xxx" as placeholder amounts):
| Statement of Profit or Loss for the year ended ___ : Particular | Amount |
|---|---|
| Capital at the end (closing capital) | xxx |
| Add: Drawings during the year | xxx |
| Total Capital | xxx |
| Less: Additional Capital | (xxx) |
| Adjusted Capital | xxx |
| Less: Capital at the beginning | (xxx) |
| Profit / Loss during the year | xxx |
Note that the source lists the deduction line as "less: Additional Capital" (in the sense of "less: [any] Additional Capital [introduced during the year]"); an amount of additional capital reduces the adjusted capital before it is compared with the opening capital, because that amount was not earned as profit, it was introduced by the owner. Drawings, conversely, are added back because they reduced the closing capital without being a business loss.