INCOMPLETE RECORDS

Incomplete records simply mean that transactions have been recorded on a single basis
or part of the records of a business have been destroyed/lost. It may also happen that
the accounts of a business have been prepared by an incompetent accountant. In the
case of a cash basis business, the profit of a business may be calculated as follows:

Statement of Profit / (Loss) $

Capital at end (Closing Capital) ****

Less Capital at start (Opening Capital) (**)

Less Additional capital (**)

Add Drawings **

Profit / (Loss) ***

A statement of affairs is prepared at the start and at the end of the year to show
opening and closing capital. A statement of affairs simply shows assets and liabilities. In
other cases, the single entries must be converted into double entries, and then use the
available information to prepare the financial statements. The following steps may be
followed:

Advantages of maintaining double-entry records

Maintaining a full set of double-entry records is important and provides many benefits.
These include the following:

1. Full details are available about the business's assets, liabilities, revenues, and expenses.

2. The preparation of financial statements is relatively straightforward.

3. The calculation of the profit or loss for the year is likely to be reliable and accurate.

4. More informed decision-making is possible.

5. A greater degree of control over business activities can be exercised.

6. The possibility of fraud is reduced.

7. Comparisons with the results of previous years and with other businesses are possible.

8. Detailed records are available for reference purposes.

Step 1 - Calculate capital at start

Capital = Assets at start – Liabilities at start

Step 2 - Calculate total sales

 To calculate credit sales

Trade Receivables account

Balance b/f *** Receipts ***

Credit sales ? Discount allowed ***

Return inwards ***

Bad debts ***

Balance c/d ***

*** ***

Balance b/d ***

To calculate cash sales/cash stolen

Cash Account

Balance b/f *** Cash sales banked ***

Cash sales ? Purchases ***

Other cash receipts Drawings ***

Expenses ***

Cash Stolen ?

Balance c/d ***

*** ***

Balance b/d ***

Note: Cash stolen must be recorded as an expense in the income statement

Total Sales = Credit sales + Cash sales

Step 3 - Calculate total purchases

Trade Payables Account

Payments *** Balance b/f ***

Discount received *** Credit purchases ?

Balance c/d ***

*** ***

Balance b/d ***

Total purchases = Credit purchases + Cash purchases

Step 4 - Calculate amount of expenses to be recorded in income statement

Expenses Account

Balance b/f *** Balance b/f ***

(Prepaid at start) (Due at start)

Bank *** Income Statement ?

Balance c/d Balance c/d

(Due at end) *** (Prepaid at end) ***

*** ***

Balance b/d *** Balance b/d ***

Step 5 - Calculate amount of Depreciation charged to income statement

Non-current assets Account

Balance b/f *** Disposal - NBV ***

Acquisition *** Depreciation ***

Balance c/d ***

*** ***

Balance b/d ***

Disposal account may be prepared to calculate Profit / Loss on disposal. (Chapter IAS 16)

Worked Example 1 - Incomplete Records – Cash Stolen

Nikhil does not keep a full set of accounting records. However, he was able to provide the
following information for the year ended 31st December 2017:

1st January 2017 31st December 2017

Property - cost 80 000 80 000

Equipment - NBV 23 000 37 000

15% Bank Loan 28 000 28 000

Inventory 12 000 10 000

Trade receivables 8 000 8 500

Trade payables 6 200 5 900

Cash 1 050 450

General expenses Due 300 150

General expenses Prepaid 200 450

 Bank Account

Balance b/f 1 400Payment to suppliers 56 970

Cash sales banked 8 530General expenses 76 830

Receipts from customers 145 570Equipment 20 000

Balance c/d 1 700

155 500 155 500

Additional information:

 Cash sales amounted to $67 240

 The following cash payments were made:

Purchases $ 8 430

Drawings $ 16 500

General Expenses $ 32 780

 Nikhil suspects that an amount of cash has been stolen from the cash till.
 Discount allowed and received were $ 500 and $ 900 respectively
 Nikhil withdrew goods valued at $ 1 800 for his own use. No records were made

Required a) Income statement for the year ended 31st December 2017

b) Statement of financial position as at 31st December 2017.

Step 1 - Calculate capital at start

Assets = 80 000 + 23 000 + 12 000 + 8 000 + 1 050 + 200 + 1 400 = 125 650

Liabilities = 28 000 + 6 200 + 300 = 34 500

Capital = 125 650 – 34 500 = 91 150

Step 2 - Calculate total sales / cash stolen

Trade receivables Account

Balance b/f 8 000Receipts 145 570

Credit sales 146 570Disc. Allowed 500

Balance c/d 8 500

154 570 154 570

Balance b/d 8 500

Cash Account

Balance b/f 1 050Cash sales banked 8 530

Cash Sales 67 240Purchases 8 430

Drawings 16 500

Gen. Expenses 32 780

Cash stolen 1 600

Balance c/d 450

68 290 68 290

Balance b/d 450

Total sales = Credit sales + cash sales = 146 570 + 67 240 = 213 810
Step 3 - Calculate total purchases

Trade payables Account

Payments 56 970Balance b/f 6 200

Disc. Received 900Credit purchases 57 570

Balance c/d 5 900

63 770 63 770

Balance b/d 5 900

Total purchases= Credit purchases + cash purchases = 57 570 + 8 430 = 66 000

Step 4 - Expenses charges to income statement

General Expenses Account

Balance b/f 200Balance b/f 300

Cash 32 780Income Stmt. 109 210

Bank 76 830Balance c/d 450

Balance c/d 150

109 960 109 960

Balance b/d 450Balance b/d 150

Step 5 - Depreciation charged to income statement

Equipment at NBV Account

Balance b/f 23 000Disposal ***

Acquisition 20 000Depreciation 6 000

Balance c/d 37 000

43 000 43 000
Income Statement for the year ended 31st December 2017 $ $

Revenue 213 810

Less Cost of sales

Opening inventory 12 000

Purchases 66 000

Less drawing of goods (1 800)

Less closing inventory (10 000)

Cost of sales (66 200)

Gross Profit 147 610

Discount received 900

148 510

Less Expenses

Depreciation on Equipment 6 000

Discount allowed 500

General expenses 109 210

Interest on bank loan(15/00*28000) 4 200

Cash stolen 1 600 121 510

Profit for the year 27 000

 Statement of financial position as at 31st December 2017

Non Current Assets

Equipment 37 000

Property 80 000

117 000

Current Assets

Closing inventory 10 000

Trade receivables 8 500

Bank 1 700

Cash 450

Other receivables 450 21100

Total Assets 138100

Equity

Capital at start 91150

Add Profit for the year 27000

Less Drawings (16500+1800) (18 300)

Owner's capital 99850

Noncurrent liabilities

15% Bank Loan 28000

Capital Employed 127850

Current Liabilities

Trade payables 5900

Other payables : Gen. Expenses due 150

Other payables : Interest on loan due 4200