Profit under single entry system of Book Keeping means ______________.

The difference between opening and closing cash balances and reduced by fresh capital introduced.

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The difference between opening net assets and closing net assets as increased by drawings and reduced by new capital introduced.

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Profit shown by Trading and Profit and Loss Account and Balance sheet.

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The amount of closing cash balance as reduced by expenses.

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Solution

The correct option is D The difference between opening net assets and closing net assets as increased by drawings and reduced by new capital introduced.
When there is no double entry system of accounting is followed, the profits are calculated on the basis of comparing the opening and closing of capital/assets by giving the effect of drawings.
This can be represented as:

Closing Capital xxxxx
Add: Drawings xxxxx
Less: Fresh capital xxxxx
Less: Opening Capital xxxxx
Balance will be Profit xxxxx

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Similar questions

State whether the following statement are true or false.

1. Final Accounts are prepared on the basis of Trial Balance.
2. Trading Account is a part of Profit & Loss Account.
3. Profit Loss Account is prepared to find out Gross Profit or Gross Loss.
4. Gross Profit or Gross Loss is transferred to Balance Sheet.
5. An amount of net profit is added to the capital.
6. All indirect expenses are debited to trading account.
7. Balance Sheet is a statement and not an account.
8. Capital account is a personal account.
9. Amount of prepaid expenses appears on assets side.
10. Bank Overdraft is a liability of business concern.

Q. From the following Trial Balance of Mr. Tarun Ghosh, prepare Trading and Profit and Loss A/c for the year ending 31st March, 2017 and a Balance Sheet as at that date:

Dr. Balances	(₹)	Cr. Balances	(₹)
Opening Stock	38,000	Capital	3,00,000
Purchases	12,60,000	Secured Loan	20,000
Wages: Factory Office	20,000 1,600	Sales	15,40,000
Salary	54,000	Sundry Creditors	40,000
Business Premises	2,00,000	Returns Outwards	15,000
Furniture and Fixtures	40,000	Bills Payable	12,000
Packing Machinery	60,000	Bank	33,000
Tools	15,000
Rent	58,400
Loan to Mr. Ram Narain on 1st November, 2016 @ 12% p.a.	10,000
Sundry Debtors	1,31,500
Cash in Hand	7,400
Drawings	60,000
Bills Receivable	4,100
	19,60,000		19,60,000

Adjustments:-
(i) Closing Stock amounted to ₹ 50,000.
(ii) Goods costing ₹ 8,000 were sent to a customer on sale or return basis for ₹ 10,000 on 30th March, 2017 and had been recorded in the books as actual sales.
(iii) Allow 8% interest on Capital and charge ₹ 3,000 as interest on drawings.
(iv) Depreciate: Business premises by 5%; Furniture and Fixtures by 20% and Packing Machinery by 10%. Tools are to be revalued at ₹ 12,000.
(v)

2 \frac{1}{2} %

for discounts is to be provided on Debtors.
(vi) ₹ 1,500 is to be provided for Bad and Doubtful Debts.

If opening capital is less than closing capital, it shows:

(a) Loss

(b) Profit

(d) Profit, if no additional capital is introduced.

PRACTICAL PROBLEM

Following is the Balance Sheet of Dhiraj and Niraj who shared profits and losses equally.

Balance Sheet as on 31^st March, 2013
Liabilities		Amount Rs	Assets	Amount Rs
Capital A/c’s			Plant and Machinery	45,000
	Dhiraj	1,25,000	Land and Building	84,000
	Niraj	35,000	Patents	3,400
Creditors		86,200	Stock	47,800
Bills Payable		28,000	Furniture	10,600
General Reserve		6,800	Debtors	80,000
			Cash	10,200
		2,81,000		2,81,000

On 1^st April, 2013 they agreed to admit Suraj on the following terms and conditions:

1) Suraj to bring for 1/3^rd share in future profit in cash Rs 90,000 towards his capital.

2) The firms goodwill should be raised to Rs 90,000 and it is to be written off after Suraj admission in new profit ratio.

3) Plant and Machinery was found undervalued by 10% and Land and Building was found overvalued by 20%.

4) Stock to be increased by Rs 2,200 and furniture to be reduced to Rs 10,000/-

5) Out of creditors Rs 1,200 is no more payable.

6) The Capital A/c to be adjusted in new profit sharing ratio by opening the current accounts.

Prepare Revaluation A/c, Capital A/c and New Balance Sheet.

Following is the Balance Sheet of A, B and C who share profits and losses of the business in the ratio of 3:2:1.

BALANCE SHEET

as at 31st March, 2016

$\begin{matrix} Capital and Liabilities & Rs & Assets & Rs Capital A/cs: & Furniture & 95, 000 A 1, 20, 000 & Business Premises & 2, 05, 000 B 1, 20, 000 & Stock-in-Trade & 40, 000 C 1, 20, 000 - -------- - & 3, 60, 000 & Debtors & 28, 000 Sundry Creditors & 20, 000 & Cash at Bank & 15, 000 Outstanding Salaries and Wages & 7, 200 & Cash in Hand & 4, 200 ¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯ 3, 87, 200 - -------- - & ¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯ 3, 87, 200 - -------- - \end{matrix}$

On 1st April, 2016, they admit D as partner on the following conditions:

(i) D will bring Rs 1,20,000 as his Capital and also Rs 30,000 as Goodwill premium for a quarter of the share in the future profit/loss of the firm.

(ii) The values of the fixed assets and business premises of the firm will be increased by 10% before the admission of D.

(iii) The future profits and losses of the firm will be shared equally by the partners.

Show Journal entries, Revaluation Account, Partner's Capital Accounts and the opening Balance Sheet of the new firm to include the above-mentioned transactions assuming that the conditions were duly satisfied.

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