SAI SUDHIR DEGREE & PG COLLEGE

Conversion Method or Final Accounts Method

Under the statement of affairs method profit or loss of a business concern is

ascertained without preparing trading and profit and loss Account.
Conversion Method means converting accounts from single entry to double
entry method. Under Conversion Method Profit and Loss Account and Balance
sheet can be prepared from incomplete books of accounts by making certain
adjustments and preparing some accounts. All necessary books and accounts
should be opened and all transactions should be recorded in the books
following double entry principles.
The following steps may be followed for conversion:

 If capital at the beginning is not given, it is to be ascertained by

preparing opening statement of affairs.

 Cash book should be prepared which will help in the ascertainment of

opening or closing Cash and Bank balances.

 Total Debtors Account and Bills Receivable Account, should be prepared

to ascertain the missing information regarding Credit Sales, closing
balance of Debtors.

 Total Creditors Account and Bills Payable Account, should be prepared

to ascertain the missing information regarding Credit Purchases, closing
balance of Creditors.

 Prepare Stock Account to ascertain the missing information.

 Prepare Fixed Assets Account to ascertain the missing information such

as opening/closing balance, purchase/sale of fixed assets and
Depreciation etc.,

 Prepare Trial Balance to check the arithmetical accuracy.

 Prepare Trading and Profit and Loss Account and the Balance Sheet.
 SAI SUDHIR DEGREE & PG COLLEGE

Dr Total Debtors Account Cr

Particulars Amount Particulars Amount

To Balance b/d ***** By Cash or Bank a/c *****
(opening balance) (Amt. received from Drs)

To Credit Sales ***** By B/R Received ****

To B/R Dishonored ***** By Sales Return or (RI) ****

By Discount allowed ****

By Bad Debts ****

By Balance c/d ****

(closing balance)
***** *****

Dr Bills Receivable Account Cr

Particulars Amount Particulars Amount

To Balance b/d ***** By Cash Account *****
(opening balance) (B/R Collected)
To Total Debtors a/c ***** By Total Debtors a/c ****
(B/R Received) (B/R Dishonored)
By Balance c/d
(closing balance) ****

***** *****
 SAI SUDHIR DEGREE & PG COLLEGE

Dr Total Creditors Account Cr

Particulars Amount Particulars Amount

To Cash or Bank a/c ***** By Balance b/d *****
(Amt. paid to Crs.) (opening balance)
To B/P Accepted ***** By Credit Purchases ****
To Discount Received *****
To Purchase Returns **** By B/P Dishonored ****
To Balance c/d *****
(closing balance)

***** *****

Dr Bill Payable Account Cr

Particulars Amount Particulars Amount

To Cash Account ***** By Balance b/d *****
(B/P honored) (opening balance)
To Total Creditors a/c ***** By Total Creditors a/c ****
(B/P Dishonored) (B/P Accepted)
To Balance c/d *****
(closing balance)

***** *****
 SAI SUDHIR DEGREE & PG COLLEGE

Hints for tracing Missing Information

Missing Information Hints for Tracing

1. Cash Sales Cash & Bank Account Summary
Total Sales – Net Credit Sales
2. Net Credit Sales Prepare Total Debtors Account
Total Sales – Cash Sales – Sales Returns
3. Net Sales Cash Sales + Credit Sales – Sales Returns
Cost of Goods Sold + Gross Profit
Gross Profit X 100/Rate of Gross Profit on Sales

4. Cost of Goods Sold Opening Stock + Purchases + Direct Expenses -

Closing Stock.
(Direct Expenses = carriage/ cartage/Freight
Inward etc.,)
Net Sales – Gross Profit
Stock Account

5. Gross Profit Net Sales x Rate of Gross Profit/100

Net Sales – Cost of Goods Sold
6. Cash Purchases Cash & Bank Account Summary
Total Purchases – Net Credit Purchases
7. Net Credit Purchases Prepare Total Creditors Account
Total Purchases – Cash Purchases – P. Returns
8.Net Purchases Cash Purchases + Credit Purchases – P. Returns
Cost of Goods Sold + Closing Stock – Opening
Stock
9. Drawings/operating Cash and Bank Account Summary
Expenses paid/Loan
Repayment/Additional
Capital Introduced/Loans
raised/Income Received
10. Cash and Bank Balance Cash and Bank Account Summary
Cash stolen by Cashier
11. Opening Capital Opening Balance Sheet
12. Opening and Closing Prepare the Account of Respective Item
Balance of any other item
 SAI SUDHIR DEGREE & PG COLLEGE
Problem 1
From the following particulars, find out the credit Sales and Credit Purchases
for the year ended 31st March, 2018
₹
Total Debtors on April 1 2017
st 14750
Total Creditors on April 1 2017
st 8970
Cash received during the year from Sundry Debtors 157450
Discounts allowed during the year 580
Bad debts written off 850
Returns inwards 1150
Bills received from Customers 9600
Cash paid to Sundry Creditors 129780
Discount received from them 430
Returns to Suppliers 520
Bills issued to them 6400
Total Debtors on March 31 2018 st 13890
Total Creditors on March 31st 2018 9450

Solution 1

Dr. Total Debtors Account Cr

Particulars Amount Particulars Amount

To Balance b/d 14750 By Cash Account 157450
(opening balance) (Amt. received from Drs)

To Credit Sales 168770 By B/R Received 9600

(Balance Amount)
By Return Inwards (SR) 1150

By Discount allowed 580

By Bad Debts 850

By Balance c/d 13890

(closing balance)
183520 183520
 SAI SUDHIR DEGREE & PG COLLEGE
Dr Total Creditors Account Cr

Particulars Amount Particulars Amount

To Cash Account 129780 By Balance b/d 8970
(Amt. paid to Crs.) (opening balance)
To B/P Accepted 6400 By Credit Purchases 137610
To Discount Received 430 (Balance Amount)
To Purchase Returns 520
To Balance c/d 9450
(closing balance)

146580 146580

Problem 2
From the following figures drawn from the books of a trader, who maintains
his accounts as per Single Entry System, you are required to calculate Total
Sales.

₹
Bills receivable in the beginning of the year 7800
Debtors in the beginning of the year 30800
Bills receivable en-cashed during the year 20900
Cash received from Debtors 70000
Bad debts written off 2800
Returns inwards 8700
Bills receivable dishonored 1800
Bills Receivable at the end of the year 6000
Debtors at the end of the year 25500
Cash Sales as per Cash Book 40900
 SAI SUDHIR DEGREE & PG COLLEGE
Solution 2

Dr. Bills Receivable Account Cr

Particulars Amount Particulars Amount

To Balance b/d 7800 By Bank Account 20900
(opening balance) (B/R Collected)
To Total Debtors a/c By Total Debtors a/c 1800
(B/R Received) 20900 (B/R Dishonored)
(Balance Amount) By Balance c/d
(closing balance) 6000

28700 28700

Dr. Total Debtors Account Cr

Particulars Amount Particulars Amount

To Balance b/d 30800 By Cash Account 70000
(opening balance) (Amt. received from Drs)
To Bills Receivable 1800
( Dishonoured) By B/R Received 20900
To Credit Sales 95300 (B/R Account)
(Balance Amount) By Return Inwards (SR) 8700

By Bad Debts 2800

By Balance c/d 25500

(closing balance)
127900 127900

Statement of Total Sales

₹
Credit Sales (as per Total Debtors Account) 95300
Cash Sales as per Cash Book 40900
Total Sales 136200
 SAI SUDHIR DEGREE & PG COLLEGE
Problem 3
From the following particulars, find out the credit Sales and credit Purchases
for the year ended 31st March, 2019
₹
Total Debtors on April 1 2018
st 22125
Total Creditors on April 1 2018
st 13455
Cash received during the year from Sundry Debtors 236175
Discounts allowed during the year 870
Bad debts written off 1275
Returns inwards 1725
Bills received from Customers 14400
Cash paid to Sundry Creditors 194670
Discount received from them 645
Returns to Suppliers 780
Bills issued to them 9600
Total Debtors on March 31 2019 st 20835
Total Creditors on March 31st 2019 14175
(Ans: Credit Sales ₹253155 and Credit Purchases ₹206415)

Solution 3
Dr. Total Debtors Account Cr

Particulars Amount Particulars Amount

To Balance b/d 22125 By Cash Account 236175
(opening balance) (Amt. received from Drs)

To Credit Sales 253155 By B/R Received 14400

(Balance Amount)
By Return Inwards (SR) 1725

By Discount allowed 870

By Bad Debts 1275

By Balance c/d 20835

(closing balance)
275280 275280
Dr Total Creditors Account Cr
 SAI SUDHIR DEGREE & PG COLLEGE

Particulars Amount Particulars Amount

To Cash Account 194670 By Balance b/d 13455
(Amt. paid to Crs.) (opening balance)
To B/P Accepted 9600 By Credit Purchases 206415
To Discount Received 645 (Balance Amount)
To Purchase Returns 780
To Balance c/d 14175
(closing balance)

219870 219870

Problem 4
From the following information supplied by Narendra, who keeps his books
on Single Entry System you are required to calculate Total Purchases and Bills
Payable Account.

₹
Opening Balance of Bills Payable 5000
Opening Balance of Creditors 6000
Closing Balance of Bills Payable 9000
Closing Balance of Creditors 4000
Bills Payable Discharged during the year 8900
Cash paid to Creditors during the year 30200
Returns Outwards 1200
Cash Purchases 25800
 SAI SUDHIR DEGREE & PG COLLEGE
Dr Total Creditors Account Cr

Particulars Amount Particulars Amount

To Cash Account 30200 By Balance b/d 6000
(Amt. paid to Crs.) (opening balance)
To Bill Payable 12900 By Credit Purchases 42300
To Returns Outwards 1200 (Balancing Figure)
To Balance c/d 4000
(closing balance)
48300 48300

Dr Bill Payable Account Cr

Particulars Amount Particulars Amount

To Cash Account 8900 By Balance b/d 5000
(B/P Discharged) (opening balance)
To Balance c/d By Total Creditors a/c 12900
(closing balance) 9000 (B/P Accepted)

17900 17900

Total Purchases = Credit Purchases + Cash Purchases

Total Purchases = ₹42300 + 25800 = ₹68100

Problem 5
Calculate Sales ₹
Opening Debtors 35000
Cash received from Debtors (including cash from B/R) 160000
Opening Bills Receivable 5000
Closing Bills receivable 3000
Closing Debtors 28000
 SAI SUDHIR DEGREE & PG COLLEGE
Solution 5
Dr. Total Debtors Account Cr

Particulars Amount Particulars Amount

To Balance b/d 40000 By Cash Account 160000
(opening balance) (Amt. received from Drs)
(Debtors + B/R)
By Balance c/d 31000
To Credit Sales 151000 (closing balance)
(Balance Amount) (Debtors + B/R)

191000 191000

Problem 6
Calculate Total Sales from the following information:
₹
Debtors on 1-1-2019 10000
Cash received from Debtors during the year 95000
Returns inwards 2000
Bad debts 3000
Debtors as on 31-12-2019 20000
Cash Sales (as per Cash Book) 35000

Solution 6
Dr. Total Debtors Account Cr

Particulars Amount Particulars Amount

To Balance b/d 10000 By Cash Account 95000
(opening balance) (Amt. received from Drs)

To Credit Sales 110000 By Return Inwards (SR) 2000

(Balance Amount) By Bad Debts 3000

By Balance c/d 20000

(closing balance)
120000 120000
Total Sales = Credit Sales + Cash Sale
Total Sales = ₹110000 + ₹35000 = ₹145000
 SAI SUDHIR DEGREE & PG COLLEGE
Problem 7
From the following information you are required to calculate total Purchases:
₹
Cash Purchases 15600
Creditors as on 1-1-2019 40000
Cash paid to Creditors 55800
Returns outwards 1300
Creditors as on 31-12-2019 62000

Solution 7
Dr Total Creditors Account Cr

Particulars Amount Particulars Amount

To Cash Account 55800 By Balance b/d 40000
(Amt. paid to Crs.) (opening balance)
To Returns Outwards 1300 By Credit Purchases 79100
To Balance c/d 62000 (Balancing Figure)
(closing balance)
119100 119100
Total Purchases = Credit Purchases + Cash Purchases
Total Purchases = ₹79100 + 15600 = ₹94700

Problem 8
Calculate Purchase from the following data:
Cost of goods sold ₹130000; Stock at the beginning ₹8000; Closing Stick
₹10000.

Solution 8
Cost of Goods Sold = Opening Stock + Purchases – Closing Stock
₹130000 = ₹8000 + Purchases - ₹10000
₹130000 + ₹10000 - ₹8000 = Purchases
Purchases = ₹132000.
Or
Purchases = Cost of Goods Sold + Closing Stock – Opening Stock
Purchases = ₹130000 + ₹10000 - ₹8000 = ₹132000.
 SAI SUDHIR DEGREE & PG COLLEGE
Problem 9
Ascertain Total Sales from the following:
Opening Stock ₹20000
Closing Stock ₹10000
Purchases ₹90000
Rate of Gross Profit 25% on Cost

Cost means Cost of Goods Sold

Gross Profit is 25% on Cost of Goods Sold
Cost of Goods Sold = Opening Stock + Purchases – Closing Stock
Cost of Goods Sold = ₹20000 + ₹90000 - ₹10000 = ₹100000
Cost of Goods Sold = ₹100000
Gross Profit = Cost of Goods Sold X 25/100
Gross Profit = ₹100000 X 25/100 = ₹25000
Sales = Cost of Goods Sold + Gross Profit

Sales = ₹100000 + ₹25000 = ₹125000.

Sales = ₹125000

Problem 10
Ascertain the Opening Stock
Sales ₹120000
Rate of Profit 25% on Sales
Purchases ₹80000
Closing Stock ₹30000.

Solution 10

Cost of Goods Sold = Opening Stock + Purchases – Closing Stock

or
Cost of Goods Sold = Sales – Gross Profit

Gross Profit = Sales X 25/100

 SAI SUDHIR DEGREE & PG COLLEGE
Gross Profit = ₹120000 X 25/100 = ₹30000

Cost of Goods Sold = ₹120000 – ₹30000 =₹90000

Cost of Goods Sold = Opening Stock + Purchases – Closing Stock

₹90000 = Opening Stock +₹80000 - ₹30000
Opening Stock = ₹90000 + ₹30000 – ₹80000 = ₹40000.
₹Opening Stock = ₹40000

Or
Trading Account
Particulars ₹ particulars ₹
To Opening Stock 40000 By Sales 120000
(Balance Figure) By Closing Stock 30000
To Purchases 80000
To Gross Profit 30000
(120000 X 25/100)
150000 150000

Problem 11
Ascertain Closing Stock from the following:
Opening Stock ₹40000
Sales ₹250000
Purchases ₹210000
Rate of Gross Profit 20% on Sales

Solution 11

Trading Account
Particulars ₹ particulars ₹
To Opening Stock 40000 By Sales 250000
To Purchases 210000 By Closing Stock 50000
To Gross Profit 50000 (Balance Figure)
(250000 X 20/100)

300000 300000