Question

Explain how the following may be ascertained from incomplete records:

(a) Opening capital and closing capital

(b) Credit sales and credit purchases

(c) Payments to creditors and collection from debtors

(d) Closing balance of cash.

Answer 1

1. Opening capital and closing capital: Opening capital can be ascertained by preparing opening statement of affairs at the beginning of the accounting period and closing capital can be ascertained by preparing closing Statement of Affairs at the end of the accounting period.

Statement of Affairs as on....
Liabilities	Amount Rs	Assets	Amount Rs
Bills Payable	–	Land and Building	–
Creditors	–	Machinery	–
Outstanding Expense	–	Furniture	–
Capital (Balancing Figure)@	–	Stock	–
		Debtors	–
		Cash and Bank	–
		Prepaid Expenses	–
		Capital-Deficiency (Balancing Figure)*	–

* When liabilities are more than assets, capital appears in assets side, as it is balancing figure.

^@ When the assets’ balance exceeds liabilities’ balance, the balancing figure is denoted by capital in the Liabilities side of the Statement of Affairs.

2. Credit Sales and Credit Purchases: Credit sales are ascertained as the balancing figure of the Total Debtors Account and Credit Purchases are ascertained as the balancing figure of the Total Creditors Account.

Total Debtors Account
Dr.					Cr.
Particulars	J.F.	Amount Rs	Particulars	J.F.	Amount Rs
Balance b/d		–	Cash		–
Bills Receivable		–	Bank		–
(Bill Dishonoured)			Discount Allowed		–
Bank (Cheque Dishonoured)		–	Bad Debts		–
Credit Sales (Balancing Figure)		–	Sales Returns		–
			Bills Receivable (Bill Drawn)		–
			Balance c/d		–

Total Creditors Account
Dr.					Cr.
Particulars	J.F.	Amount Rs	Particulars	J.F.	Amount Rs
Cash		–	Balance b/d		–
Bank		–	Bank (Cheque Dishonoured)		–
Bills Payable		–	Bills Payable (Bills Dishonoured)		–
Discount Received		–	Credit Purchases		–
Purchases Returns		–	(Balancing Figure )		–
Balance c/d		–

3. Payment to creditors and collection from debtors: Payment to the creditors are ascertained from the Total Creditors Account as a balancing figure and collection from debtors are ascertained from the Total Debtors Account as a balancing figure.

4. Closing balance of cash: Closing balance of cash is ascertained from the Cash Book, which shows all receipts in the debit side and all payments in the credit side during an accounting year and the balancing figure of the cash book is the closing balance of cash.