Assets - Liabilities. Capital = Assets - Liabilities.

Under the net worth method, profit is found using:

Opening and closing capital. Compare closing and opening capital with adjustments.

Drawings during the year are:

Added back to profit calculation. Drawings reduce capital so they are added back.

Additional capital introduced during the year is:

Deducted from the increase in capital. It is not profit.

Maharashtra State Board · HSC Commerce · Class 11 (Std XI)

Class 11 Book Keeping and Accountancy Chapter 10: Single Entry System

Short notes, key concepts, quick revision and practice MCQs with answers

The single entry system is an incomplete way of keeping accounts, mostly used by small traders. Since full records are not kept, profit is found by comparing capital at the beginning and end (statement of affairs).

Key concepts: Single Entry System

Meaning: Incomplete system of records; only personal and cash accounts are properly kept.
Features: No double aspect, no trial balance, limited records, mainly used by small businesses.
Statement of affairs: A list of assets and liabilities at a date to find capital: Capital = Assets - Liabilities.
Conversion method: Profit found by converting single entry to double entry through statements and ledger accounts.
Profit calculation (net worth method): Profit = Closing capital - Opening capital + Drawings - Additional capital introduced.

Quick revision: important points

No complete final accounts can be prepared directly.
Statement of affairs is not a balance sheet since it is prepared from incomplete records.
Drawings are added back, additional capital is deducted.

Practice MCQs with answers

Single entry system is:
1. An incomplete system of records
2. A complete system
3. A tax
4. A bank system
Show answer
Answer: A. An incomplete system of records
Only partial records are kept.
Capital equals:
1. Assets - Liabilities
2. Assets + Liabilities
3. Liabilities - Assets
4. Sales - Purchases
Show answer
Answer: A. Assets - Liabilities
Capital = Assets - Liabilities.
Under the net worth method, profit is found using:
1. Opening and closing capital
2. Sales only
3. Journal
4. Ledger only
Show answer
Answer: A. Opening and closing capital
Compare closing and opening capital with adjustments.
Drawings during the year are:
1. Added back to profit calculation
2. Deducted twice
3. Ignored
4. Treated as sales
Show answer
Answer: A. Added back to profit calculation
Drawings reduce capital so they are added back.
Additional capital introduced during the year is:
1. Deducted from the increase in capital
2. Added to profit
3. Ignored
4. Treated as sale
Show answer
Answer: A. Deducted from the increase in capital
It is not profit.

All Class 11 Book Keeping and Accountancy chapters

Class 11 Book Keeping and Accountancy notes: all chapters