Page 174 - DEBK-XI(2020)

20.2 Double Entry Book Keeping—CBSE XI

STATEMENT OF AFFAIRS
as at ...
Liabilities ` Assets `
Sundry Creditors ... Cash in hand ...
Bills Payable ... Cash at Bank ...
Outstanding Expenses ... Sundry Debtors ...
Bank Overdraft ... Bills Receivable ...
Capital (Balancing Figure) ... Stock ...
Prepaid Expenses ...
Fixed Assets ...
... ...

Step 2: Add: Drawings for the period to the closing capital (calculated as per Step 1)
Step 3: Deduct: the amount of Capital introduced from the closing capital (Step 1)
Step 4: Calculate opening Capital by preparing a statement of affairs at the beginning of
the accounting period.
Step 5: Calculate Profit or Loss by deducting opening capital from the adjusted closing capital.
Adjusted Closing Capital = Closing Capital + Drawings – Capital introduced during
the year.
Step 6: Ascertain Profit or Loss by deducting opening capital from adjusted closing capital.
Step 7: Make Adjustment for the items not yet adjusted while calculating closing capital
e.g., Depreciation, outstanding/prepaid expenses etc.
STATEMENT OF PROFIT OR LOSS for the year ended...
Particulars `
Capital at the end ...
Add: Drawings (whether in cash or kind) during the accounting period ...
...
Less: Additional Capital introduced (whether in cash or in kind) during the year ...
Adjusted Capital at the end ...
Less: Capital at the beginning ...
Profit (if Adjusted Capital is more than the Opening Capital)
or Loss (if Adjusted Capital is less than the Opening Capital) ...

• Ascertainment of Profit/Loss by Conversion Method: Under the Single Entry System,
Dual Aspect Principle of Accounting does not hold good as two-fold effect of each and
every transaction are not recorded. As a result, Trial Balance is not prepared and also the
information necessary for the preparation of Trading Account and Profit and Loss Account
is not available. If Profit or Loss of the enterprise is to be determined by preparing final
accounts, then Single Entry Records are converted into Double Entry Records.

In this method, we take following steps to prepare Trading and Profit and Loss Account and
Balance Sheet of the enterprise:
Step 1: Prepare Opening Statement of Affairs to find missing value of assets and liabilities
such as opening capital, creditors, stock, etc.