1. Advanced Financial Accounting FIN-611 Mian Ahmad Farhan Lecture-3 Single Entry (Conversion Method)

2. Necessary Documents Required in Conversion Method 1.Cash book 2.Total Debtors account 3.Total Creditors account 4.Statement of affairs relating to opening date 5.Year end adjustment

3. Cash Book ReceiptsAmountPaymentAmount Opening balance All receipts either relating capital or revenue receipts xxx All payments either relating capital or revenue payments Closing balance xxx

4. Debtors Account Increase in DebtorsAmountDecrease in DebtorsAmount Opening balance Credit sales xxx Cash received from debtors Discount allowed Bad debts Sales return Closing balance xxx

5. Creditors Account Decrease in CreditorsAmountIncrease in CreditorsAmount Cash paid to creditors Discount received Purchase return Closing balance xxx Opening balance Credit purchase xxx

6. Debit (Dr) and Credit (Cr) Rules Debit (Dr) group Assets Expenses Credit (Cr) group Owner’s equity Liability Income Increase Dr. Decrease Cr. Increase Cr. Decrease Dr.

7. Statement of Affairs It consists of previous year “Balance Sheet” items Assets Amount (Rs) Liabilities Amount (Rs) Furniture & Fixture Equipments Stock Debtors Prepaid expenses Bank balance Cash xxx Loan Creditors Payable expenses Owner’s equity/Net Assets (Balancing figure) xxx

8. Year End Adjustments It includes various adjustments relating to previous year.

9. Company Name Income Statement For the year ended ------- Salesxxx Less Cost of goods sold Opening Stock xxx Add Purchases xxx Less Closing Stock xxx xxx Less Operating expenses xxx Add Other Income xxx Gross Profit xxx

10. Sales Cash Sales Credit Sales Journal Entry Debtors xxx Sale xxx Journal Entry Cash xxx Sale xxx

11. Cash Book ReceiptsAmountPaymentAmount Cash received from debtors xxx

12. Debtors Account Increase in DebtorsAmountDecrease in DebtorsAmount Credit salesxxxCash received from debtors xxx

13. Purchases Cash P urchase Credit Purchase Journal Entry Creditors xxx Purchase xxx Journal Entry Purchase xxx Cash xxx

14. Cash Book ReceiptsAmountPaymentAmount Cash purchasesxxx

15. Creditors Account Decrease in CreditorsAmountIncrease in CreditorsAmount Credit purchasexxx

16. Closing Stock Closing stock information is available at year end balance sheet.

17. Operating Expenses 1. Cash based expenses 2. Expenses relating to receivables 3. Expenses relating to fixed assets a). Depreciation b). Loss on disposal of an assets

18. Cash Book ReceiptsAmountPaymentAmount Expenses paid in cash xxx

19. Cash Based Expenses Expenses paid in cash during the year xxx Less Opening balance of Accrued expenses xxx Add Closing balance of Accrued expensesxxx Add Opening balance of Prepaid expenses xxx Less Closing balance of Prepaid expensesxxx xxx

20. Expenses Related to Receivable 1. Discount Allowed 2. Bad debts 3. Provision for doubtful debts Debtors account Year end adjustment

21. Provision for Doubtful Debts 1. When there is an increase in Provision it will be charged as an expense. 2. When there is an decrease in Provision it will be credited to the expense.

22. Operating Expenses 1. Cash based expenses 2. Expenses relating to receivables 3. Expenses relating to fixed assets a). Depreciation b). Loss on disposal of an assets Cash Account Debtors Account & Year end adjustment Year end adjustment Cash Account & Year end adjustment

23. Other Income 1. Incomes based on cash 2. Incomes relating to payables 3. Incomes relating to fixed assets

24. Incomes Based on Cash Cash received during the yearxxx Less Opening balance of Accrued income xxx Add Closing balance of Accrued income xxx Add Opening balance of advance income xxx Less Closing balance of advance income xxx xxx

25. Incomes Relating to Payables Discount received Journal Entry Creditors xxx Income xxx

26. Income Relating to Fixed Assets Profit on disposal of an Assets.