Conversion Method
The process of collecting, computing and recording missing information along with the available
data in the incomplete books of a business is called 'Conversion Method'. Once the books are
converted, all future transactions can be recorded as per double entry system.
Ascertainment of Missing items by preparing various accounts
1. Total Debtors account is prepared to find out any one of these following missing items:
(1) Credit Sales
(2) Opening Balance of Debtors
(3) Closing Balance of Debtors
(4) Cash collected from Debtors
Format of Total Debtors Account
Rs. Rs.
To Balance b/d XXX By Cash Received XXX
To B/R Dishonoured XXX By Bank XXX
To Credit Sales XXX By Bills Receivable received XXX
By Discount Allowed XXX
By Sales Returns XXX
By Bad Debts XXX
By Balance c/d XXX
XXX XXX
2. Total Creditors account is prepared to find out any one of these following missing items:
(1) Credit Purchases
(2) Opening Balance of Creditors
(3) Closing Balance of Creditors
(4) Cash paid to Creditors
Format of Total Creditors Account
Rs. Rs.
To Cash paid XXX By Balance b/d XXX
To Bank XXX By Credit Purchases XXX
To Bills Payable XXX By B/P Dishonoured XXX
To Purchase Returns XXX
To Discount Received XXX
To Balance c/d XXX
XXX XXX
3. Bills Receivable account is prepared to find out any one of these following missing items:
(1) Opening B/R
(2) Closing B/R
(3) B/R Received
(4) B/R Collected
Format of Bills Receivable Account
Rs. Rs.
To Balance b/d XXX By Cash (B/R Collected) XXX
To B/R Received XXX By B/R Dishonoured XXX
By Balance c/d XXX
XXX XXX
4. Bills Payable account is prepared out any one of these following missing items:
(1) Opening B/P
(2) Closing B/P
(3) B/P Issued
(4) B/P Honoured
Format of Bills Payable Account
Rs. Rs.
To Cash (Honoured) XXX By Balance b/d XXX
To B/P Dishonoured XXX By B/P Issued XXX
To Balance c/d XXX
XXX XXX
5. Cash Account is prepared to find out any one of these missing items:
(1) Opening Balance
(2) Closing Balance
(3) Cash Purchases
(4) Cash Sales
(5) Cash Received from Debtors
(6) Cash paid to Creditors
Format of Cash Account
Rs. Rs.
To Balance b/d XXX By Sundry Creditors XXX
To Sundry Debtors XXX By B/P (Honoured) XXX
To B/R (Collected) XXX By Cash Purchases XXX
To Cash Sales XXX By Expenses XXX
To Additional Capital XXX By Drawings XXX
To Sundry Income XXX By Sundry Expenses XXX
By Balance c/d XXX
XXX XXX
6. Preparation of Statement of Affairs at the beginning of the year to ascertain the Opening
Capital
Statement of Affairs as on 1-1-2016
Liabilities Rs. Assets Rs.
Capital (B/F) XXX Land XXX
Creditors XXX Building XXX
Loans XXX Machinery XXX
Bank Overdraft XXX Furniture XXX
Outstanding Expenses XXX Vehicles XXX
Stock XXX
Debtors XXX
Cash in hand XXX
Cash at Bank XXX
XXX XXX
Exercises
1.From the following details, prepare trading and Profit and Loss Account and Balance Sheet:
31-12-2015 31-12-2016
Rs. Rs.
Cash 6,250 10,000
Stock 25,000 12,500
Debtors 62,500 87,500
Furniture 2,500 2,500
Sundry Creditors 37,500 43,750
Other Details:
Drawings Rs. 10,000; Bad Debts Rs. 1,250; Discount received Rs. 3,750; Discount Allowed Rs.
2,500; Sundry Expenses Rs. 7,500; Payment to Creditors Rs. 1,12,500; Collection from Debtors
Rs. 1,33,750; Sales Returns Rs. 3,750: Purchase Returns Rs. 1,250; Charge 5% Depreciation on
Furniture
(Cr. Sales Rs. 1,66,250 ; Cr. Purchases Rs. 1,23,750 ; Opening Capital Rs. 58,750 ; GP Rs. 27,500 ;
NP Rs. 19,875 & BST Rs. 1,12,375)
2. A trader commenced business as a Cloth Merchant on 1-4-2016 with a capital of Rs.20,000.
On the same day, he purchased furniture for R. 4000 From the following particulars obtained
from his books which do not conform to strict double entry principles, you are required to
prepare a Trading and Profit and Loss Account and a Balance Sheet as on 31-3-2017.
Rs.
Sales (Including Cash Sales Rs. 10,000) 25,000
Purchases (Including Cash Purchases Rs. 6,000) 20,000
Drawings 1,000
Salaries 2,400
Bad Debts Written off 200
Trade Expenses 800
The trader has used cloth worth Rs.600 for private purposes and gave Rs. 1,000 to his son which
are not recorded anywhere. On 31-3-2017 , his debtors were Rs. 7,000 and Creditors were
Rs.4,000. Stock on that date was valued at Rs. 8,000.
(Cash Collected from Debtors Rs. 7,800 : Cash paid to Creditors Rs. 10,000 : GP Rs. 13,600 ; NP
Rs. 10,200 & BST Rs. 31,600)
3. Mr. Rathinasamy keeps his books under Double entry system. From the following
information, prepare Trading and Profit and Loss Account and a Balance Sheet as on 31-12-
2016:
Cash Balance as on 1-1-2016 Rs. 4,250
Assets and Liabilities
31-12-2015 31-12-2016
Rs. Rs.
Debtors 16,800 21,250
Stock 8,330 11,220
Furniture 850 850
Creditors 5,100 3,780
Other Transactions:
Rs. Rs.
Cash Received from Debtors 52,680 Cash Sales 1,275
Cash paid to Creditors 37,400 Cash Purchases 4,250
Salaries 10,200 Discount Received 595
Rent & Taxes 1,275 Discount Allowed 255
Other Expenses 1,530 Returns Inwards 850
Drawings 2,550 Returns Outwards 680
Additional Capital 1,700 Bad Debts 170
Write off depreciation of 5% on furniture. Create a reserve of 1% on debtors for doubtful debts.
(Credit Sales Rs. 58,905: Credit Purchases Rs. 37,355; Opening Capital Rs. 24,630; GP Rs. 21,295;
NP Rs. 8,205 & BST Rs. 35,765
