Full Conversion Method

The full conversion method involves conversion of records maintained on single, entry system into complete double entry records. Most of the firms which keep records on single entry system usually maintain a Cash Book along with the personal accounts of the customers and suppliers. So, in order to convert them into double entry records, you must also open all the concerned real and nominal accounts in the ledger and make proper postings therein. This involves a series of steps as follows:

1.Prepare the Statement of Affairs at the beginning and open all those real and personal accounts which do not appear in the ledger maintained under single entry system. This may involve the opening of all real accounts (other than cash and bank) and the personal accounts such as Capital, Drawings, Loan, Outstanding Expenses, Outstanding Incomes, Prepaid Expenses, etc. It can be done by passing an opening journal entry.

2.From the Cash Book, complete postings into all real and personal accounts opened above.

3.Go through the debit side of the Cash Book and open all the incomes' accounts in the ledger and make postings therein.

4.Go through the credit side of the Cash Bank and open all expenses' accounts in the ledger and make postings therein.

5.Make complete analysis of the customers accounts and complete double entry in accounts like Sales, Sales Returns, Bad Debts, Bills Receivable, etc.

6.Similarly, make a complete analysis of suppliers accounts and complete double entry in accounts like Purchases, Purchases Returns, Bills Payable, etc.

7.Go through all vouchers and documents and note whether certain other items require entry in books. For example, a piece of old furniture might have been sold which may involve some profit or loss, the same will have to be brought into books.

8.Prepare a Trial Balance and ensure that double entry is complete in every respect.

We can now prepare the Trading and Profit & Loss Account and the Balance Sheet.