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CA Foundation · Accounting · Accounts from Incomplete Records

A trader who keeps single-entry records wants to convert them into double entry at the year end. Which of the following is the usual first step in this conversion?

The usual first step is preparing a Statement of Affairs for the beginning of the year and passing opening journal entries. This shows opening assets, liabilities and capital, giving a base for the double entry books before adjusting for the year's transactions.

  1. APrepare the Trading and Profit and Loss Account directly from the closing stock figure
  2. BPrepare a Statement of Affairs at the beginning of the year and open the books with opening journal entriesCorrect
  3. CClose all personal accounts by transferring them to the Capital Account
  4. DPrepare the Balance Sheet for the end of the year before any other work

Explanation

Conversion begins by finding the opening position. A Statement of Affairs at the start of the year gives the assets and liabilities, and the difference is the opening capital. These balances are then recorded through opening journal entries. Starting with final accounts or closing personal accounts comes later or is not the procedure.

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