T5 Incomplete Records

BDFA 2103
FINANCIAL ACCOUNTING II
TOPIC 5
Incomplete Records
WHAT IS SINGLE ENTRY SYSTEM?
 refers to the bookkeeping practice that does not follow all principles of double-entry
recording.
 which are not strictly kept according to double entry system
 Due to certain circumstances and situations, the accounting records may be
destroyed or lost either in whole or in part, and is considered to be incomplete.
 With these incomplete records that involves the transactions that are recorded only
once, several problems might be faced, as the ultimate goal for the business owners
are to obtain profit.
 Without proper financial reports, a complete trial balance might not be extracted,
and the net profit and loss cannot be calculated and determined easily
Reasons for Incomplete Records
 (a) The business records have been lost or damaged due to natural disasters or fire;
 (b) The business records have been stolen;
 (c) No record of transactions is made because the business owners are unaware, or have
no knowledge in accounting;
 (d) The practice of single recording system by business owners;
 (e) The business owners purposely do not keep complete records to avoid tax payment;
and
 (f) Confusion which occurs between personal records and business records, because the
owner did not have any knowledge in accounting
Disadvantages of Incomplete Records
 (a) Trial balance cannot be prepared to test the accuracy of the entries calculations,
therefore mistakes that occur cannot be traced;
 (b) Business profit cannot be determined accurately, because the entries on the income
and expenses are not made accordingly;
 (c) The Statement of Financial Position will not reflect the true financial standing, as there
might be missing entries or values that are not the actual figure;
 (d) There is a possibility of fraud, and difficulty in finding mistakes that happen in business;
and
 (e) The comparison of financial performance cannot be carried out, as the business
cannot prepare accurate financial reporting.
FINDING NET PROFIT OR LOSS
1. Comparison Method
profit or loss of a business is
determined by comparing the
capital at the end of a given Comparison
period with the value at the Method
start of the period
Formula or
Statement
Accounting
Format
Equation Format
Statement of Statement of
Profit and Loss Affairs
Formula or Accounting Equation Format
Example 1 :
Nyatoh Trading started his business with a capital of RM320,000. At the end of the accounting period, his capital had
grown to RM410,000.
Net Profit or Loss = Ending capital - Beginning capital

= RM410,000 - RM320,000
= RM90,000
Therefore, the RM90,000 is the profit made during the accounting period.
Example 2 :
If the owner, Alex, had made personal withdrawals of cash amounting to RM17,500
during the same accounting period and additional capital RM8,000 was introduced into
the business:
Net Profit or Loss = Ending capital + Drawings – Additional Capital - Beginning capital
= RM410,000 + RM17,500 – RM8,000 - RM320,000
= RM99,500
Therefore, the RM99,500 is the profit now for the accounting period.
Statement Format
Statement of Profit and Loss
Jati Sdn Bhd

Statement of Profit and Loss
For the Year Ended 31 Dec 20X2
RM
Ending capital 410,000
Add: Drawing for the year 17,500
427,500
Less: New/Additional capital (8,000)
Adjusted capital 419,500
Less: Beginning/Initial capital (320,000)

Net profit/loss 99,500
Statement of Affairs
 similar to the Statement of Financial Position.
 lists the assets and liabilities of a business on a specific date.
 used as it is prepared from records that are not kept according to
the double entry bookkeeping principle and also the figures are not
extracted from the ledger accounts balances.
 The capital figure is obtained by = total liabilities less total assets at
that date.
 Once the capital figure has been computed, net profit and
loss can be determined by preparing the statement of profit and
loss
statement of affairs vs balance sheet
https://www.eduxir.com/curriculum/cbse/class-xi/accountancy/accounts-from-incomplete-records/
Exercises
2. Analysis Method
 done by reconstructing the ledger accounts

 sufficient information is required
 accounts receivable and accounts payable;
• cash and bank receipts and payments; and
• other assets and liabilities.
 attempts to find the revenues and expenses in order to
determine the amount of profit or loss
 differs from the comparison method, as it uses the assets and liabilities on a specific date
to determine the profit or loss for
a particular accounting period
Credit Sales :
Missing information can be derived by reconstructing the relevant ledger
account
find the total credit sales, the total accounts receivable

account will have to be reconstructed. Then, this account has to be analysed in
order to get the total credit sales for the financial year
Credit Purchase :
the total accounts payable account has to be reconstructed and analysed.
Records of cash inflows and outflows require the reconstruction of the cash
account.
total cash receipts have to be debited to the cash account, and the total cash
payments credited to the cash account.
cash sales, receipts from debtors, and other
income, such as rent received, and interest received
Accounts Receivable Control Account Analysis
Cik Alesya has been running a home-based bakery business for a year now.
She keeps her record as single-entry transactions and requires your help to do an
analysis of her sales for the year 20X1.
She has given all of her assumptions based on all the items available in her simple book of records but the
credit sales amount is missing. The details given by Cik Alesya are as follows
Encik Ahmad provided the following information on his business operations
Accounts Payable Control Account
Analysis
Using the same Cik Alesya from Example 5.8, let us now assume that she is
required to determine her account payable. The details are as given below
Total Sales – Total Purchase :

Profit/Loss
1. Incomplete record mechanism of book keeping is :
(a) Scientific
(b) Unscientific
(c) Unsystematic
(d) both (b) and (c)
2. Opening capital is ascertained by preparing :

(a) Total debtors account
(b) Total creditors account
(c) Cash account
(d) Opening statement of affairs
3. Credit purchase, during the year is ascertained by preparing :

(a) Total creditors account
(b) Total debtors account
(c) Cash account
(d) Opening statement of affairs
4. If opening capital is RM60,000, drawings RM5,000, capital introduced during the period RM10,000, closing capital
RM90,000. The value of profit earned during the period will be :
(a) RM20,000
(b) RM25,000 Ending + drawing –capital introduced – beginning
(c) RM30,000 capital = 90k+5k-10k-60k = 25k
(d) RM40,000
Do It Yourself!
Identify a small shopkeeper in your locality, ask him about the

accounting records maintained by him.
If he is not maintaining the records as per double entry system,

list the reasons thereof and ask him how does he compute profit
or loss.
https://quizizz.com/admin/quiz/5fd14c8dec6aab001b0d7cfc/quiz-1-
topic-11-incomplete-records-and-single-entry

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BDFA 2103

Net Profit or Loss = Ending capital - Beginning capital

Jati Sdn Bhd

Adjusted capital 419,500

Less: Beginning/Initial capital (320,000)

 done by reconstructing the ledger accounts

find the total credit sales, the total accounts receivable

Total Sales – Total Purchase :

2. Opening capital is ascertained by preparing :

3. Credit purchase, during the year is ascertained by preparing :

Identify a small shopkeeper in your locality, ask him about the

If he is not maintaining the records as per double entry system,

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