## Calculation of Profit or Loss under Single Entry System

Subject: Other

#### Overview

Statement of affairs is a statement of capital, liabilities and assets. It is prepared under the single entry system in order to find out the amount of opening or closing capital of the business. This note has information about the calculation of profit or loss under single entry system.
##### Calculation of Profit or Loss under Single Entry System

The following method is used for the calculation of profit or loss under single entry system:

#### Net worth method

Net worth method is also called the statement of affairs method or capital comparison method. According to this method, profit or loss of the business is determined by making a comparison between the capitals of two dates of a period.

If there are other capital related items such as drawing, additional capital, interest on capital etc. are to be adjusted to ascertain the amount of profit or loss. These items include:

• Drawing
If the drawing is made during the year, it should be added to the amount of closing capital.
If additional capital is introduced in the business during the year, it should be deducted from the amount of closing capital.
• Interest on capital
If the interest is provided on capital, it should be deducted from the amount of closing capital.

#### Statement of Affairs

Statement of affairs is a statement of capital, liabilities and assets. It is prepared under the single entry system in order to find out the amount of opening or closing capital of the business. For the purpose of determining the amount of opening capital, the statement of affairs is prepared on the opening date. It is prepared on the closing date for the purpose of determining the amount of closing capital.

Preparation of Statement of Affairs

Statement of affairs is prepared as a balance sheet. All the liabilities are shown on the left-hand side and all the assets are shown on the right-hand side. The difference between the total assets total liabilities is considered as the amount of capital.

Treatment of adjustments in single entry system

If additional information or the adjustments are given, they should be adjusted for calculating profit or loss of the business. Mainly, additional capital and the drawings are to be adjusted in the statement of profit or loss. Other additional adjustments can be adjusted either in the closing statement of affairs or in the statement of profit or loss.

##### Things to remember
• Statement of affairs is a statement of capital, liabilities and assets. It is prepared under the single entry system in order to find out the amount of opening or closing capital of the business.
• According to net worth method, profit or loss of the business is determined by making comparison between the capitals of two dates of a period.
• Statement of affairs is prepared as balance sheet.
• The difference between the total assets total liabilities is considered as the amount of capital.
• It includes every relationship which established among the people.
• There can be more than one community in a society. Community smaller than society.
• It is a network of social relationships which cannot see or touched.
• common interests and common objectives are not necessary for society.
##### Questions and Answers

Solution:

Statement of affairs

As on 31st Chaitra 2071

 Liabilities Amt (Rs.) Assets Amt (Rs.) Creditors 15,000 Stock 60,000 Bank loan 18,000 Debtors 10,000 Outstanding interest on bank loan 1,800 Cash 19,000 Capital 1,34,200 Investment 20,000 Furniture 20,000 Machinery 40,000 1,69,000 1,69,000

Statement of Profit and loss

 Particulars Amount (in Rs.) Capital as on 31st Chaitra 2072 (closing capital) 1,34,000 Add: Drawing during the year 12,000 1,46,000 Less: Opening capital 1,00,000 Net profit for the year 46,200

Solution:

Statement of Affairs

At the end of Chaitra

 Liabilities Amt (Rs.) Assets Amt (Rs.) Capital (Balancing figure) 2,44,000 Machinery 50,000 Bills payable 25,000 Less: Depreciation 5,000 45,000 Creditors 20,000 Land and building 1,20,000 Furniture 40,000 Less: Depreciation 4,000 36,000 Bills receivable 10,000 Debtors 30,000 Less: Bad debts 2,000 28,000 Cash and Bank 50,000 2,89,000 2,89,000

Statement of Profit and loss

 Particulars Amount (in Rs.) Closing capital 2,44,000 Add: Drawing during the year 15,000 2,59,000 Less: Opening capital 2,00,000 Net profit for the year 59,000

Solution:

Statement of affairs at the end of the year

 Liabilities Amount Assets Amount Sundry creditors 12,000 Cash and bank 15,000 Bank overdraft 6,000 Sundry debtors 21,000 Capital 45,000 Furniture 11,000 Stock 9,000 Bills receivable 7,000 63,000 63,000

Statement of profit and loss

 Particulars Amount (in Rs.) Closing capital 45,000 Add: Drawings 12,000 Net profit for the year 57,000

Solution:

Statement of Affairs

As on 31st Chaitra, 2059

 Liabilities Amt (Rs.) Assets Amt (Rs.) Sundry creditors 50,000 Sundry debtors 90,000 Capital (balancing figure) 1,34,000 Less: bad debts 1,000 89,000 Stock 30,000 Plant 50,000 Less: depreciation 5000 45,000 Cash balance 20,000 1,84,000 1,84,000

Statement of Profit and loss

 Particulars Amount (in Rs.) Closing capital 1,34,000 Add: Drawing during the year 12,000 Net profit for the year 1,46,000