DIFFERENCE BETWEEN DOUBLE ENTRY SYSTEM AND INCOMPLETE RECORDS
ASCERTAINMENT OF PROFIT OR LOSS
The main objective of any business enterprise is to earn profits. Businessmen is always interested to know the amount of profit earned or loss incurred during an accounting period. In case of organizations maintaining accounts under incomplete records the amount of profit or loss can be ascertained by Satement of Affairs method or Net Worth method.
STATEMENT OF AFFAIRS METHOD
Under this method, profits or losses of the business are ascertained by comparing the
- Capital at the end, and
- Capital at the begenning of the accounting period.
For ascertainment of profit or loss, the following steps shall be taken:
Step 1 – Calculate the amount of 'Opening capital'—
Opening Capital is ascertained by preparing Statement of Affair at the beginning of the accounting period.
Step 2 – Calculate the amount of 'Closing Capital'—
Clossing capital is ascertained by preparing 'Statement of Affair', at the and of the accounting period'.
Step 3 – Calculation of Profit or Loss
Profit on Loss is ascertained by preparing Statement of Profit or Loss in the follwing manner :
CBSE Accountancy Class XI ( By Mr. Aniruddh Maheshwari )
Email Id : [email protected]
