Incomplete Records - Principles of Accounting

7/27/2019 Incomplete Records - Principles of Accounting

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Incomplete Records

Some times, businesses, especially small businesses do not maintain a full set of double entryrecords. Consequently, no trial balance will be produced and a complete set offinal accounts

cannot be prepared without further analysis of the records that do exist.

Where only records available are the assets and liabilities at the beginning of the year and at

the end of the year, it is not possible to prepare a Trading and Profit and Loss account. The

assets and liabilities are usually listed in a Statement of Affairs (Similar to a Balance Sheet).

This would have been called a Balance Sheet if it had been drawn up from a set of double entry

records. Like a Balance Sheet, a Statement of Affairs can be prepared horizontally or vertically

The only way the profit for the year can be found is by comparing the capital shown in the

opening Statement of Affairs with the capital shown in the closing Statement of Affairs.

The basic formula is:

Profit Loss = Closing Capital Opening Capital (Positive figure means Profit and Negative

figure means Loss)

It may be that the owner has made drawings during the year, which will account for some of

the difference in the capital figures. Similarly the owner might have brought in additional

capital during the year, which will also account for some of the difference in the capital

figures. In this case the formula must again be modified:-

Profit or Loss = Closing Capital + Drawings during the year Additional Capital during the

year Opening Capital (Positive figure means Profit and Negative figure means Loss)

Calculation of Profit or Loss by converting the Incomplete Records into Double entry Records

In this case, in order to calculate the profit or loss of the business during the year, the Trading

and Profit and Loss accounts are prepared. For preparing the Trading and Profit and Loss

accounts, all necessary information is not available in the books. So first the missing items

have

to be calculated which are necessary for the preparation of Trading and Profit and Loss

accounts.

Usual missing items are:-

Opening/ Closing balances of Debtors, Credit Sales, and Amounts received from Debtors.

When any of these items is missing from the question, it can be calculated by preparing the

Total Debtors Account as follows.

Trade Debtors Account (Total Debtors A/C)

In another way Credit Sales = Closing Debtors + Bad debts written off + Return inwards +

Discount Allowed + Receipts from Debtors (Cash and Cheques)- Opening debtors

Opening/Closing balances of creditors/ Payments to creditors/ Credit purchases. When any of

these items is missing, it can be calculated by preparing the following Trade Creditors A/C

Trade Creditors Account (Total Creditors A/C)

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Similarly Credit Purchases = Closing Creditors + Payments to Creditors (By cash and Cheques)

+ Discount Received + Return Outwards Opening Creditors

Opening or Closing Bank Balance: To calculate any of these, the bank a/c is to be prepared in T

form by showing the receipts on the debit side and payments on the credit side.

Closing Bank Balance = Opening Balance + All Receipts All Payments

Opening Capital:- It can be calculated by preparing opening Statement of Affairs by

incorporating all the assets and liabilities on the opening date and calculating it as a balancing

figure.

Key point

Before solving the question, find out the missing items. The next step should be to find out the

missing items from the given items in the question. After making sure that, all the items

necessary for the for the preparation of the required account, then start preparation. The final

accounts will be prepared as in the case of a sole traders finalaccount.

The depreciation on fixed assets is calculated by comparing the opening and closing values of

the concerned fixed asset.

MCQ

1. Which of the following cannot maintain single entry system?

A. Sole Proprietor B. Limited companies

C. Partnership concerns D. Corporation

2. Why is a statement of affairs prepared?

A. To find out capital B. To find out fixed assets

C. To find out current assets D. To find out liabilities

3. How are the credit purchases calculated?

A. By preparing debtors account B. By preparing purchases account

C. By preparing creditors account D. By preparing capital account

4. Single entry system is defective because, under this system:

A. trial balance cannot be prepared B. balance sheet cannot be prepared

C. trading and profit and loss account cannot be prepared D. all the above

5. The following information is available:-

Capital at the beginning $ 5 250

Drawings during the year $ 3 250

Additional capital introduced $ 1 750

What is the amount of capital at the end of the year?

A. $ 3 750 B. $ 6 750 C. $ 10 250 D. $ 250

6. Following details are supplied to you:-

Opening capital $ 9 700


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Closing capital $ 10 750

Drawings during the year $ 2 150

Additional capital introduced- nil

What is the amount of profit or loss?

A. $ 1 100 profit B. $ 1 100 loss C. $ 3 200 profit D. $ 3 200 loss

7. The following details are from the books of a business:-

Capital on 1st January 2003 $ 5 500

Profit during the year $ 2 500

Capital at 31st December 2003 $ 7 250

What is the amount of drawings during the year?

A. Nil B. $ 750 C. $ 5 000 D. $ 2 500

8. Following information is given:

Opening debtors $ 6 000

Closing debtors $ 7 500

Cash received from debtors $ 12 500

Cash sales $ 4 000

What is the amount of purchases?

A. $ 11 000 B. $ 14 000 C. $ 1000 D. Cannot be calculated

9. Cash paid to creditors can be calculated from:

A. total debtors account B. total creditors account

C. balance sheet D. statement of affairs

10. Net profit + expenses cost of goods sold =

A. gross profit B. income C. purchases D. sales

11. The books of a business show the following details:

debtors on 1st January $ 5 000

debtors at 31st December $ 6 000

receipts from debtors $ 40 000

discount allowed $ 1 000

cash sales $ 10 000

What are the total sales for the year?

A. $ 42 000 B. $ 41 000 C. $ 50 000 D. $ 52 000

12. The books of a business show the following details:

creditors at the beginning $ 2 500

creditors at the end $ 3 000

paid to creditors $ 20 000

discount received $ 500

cash purchases $ 5 000

What are the total purchases for the year?

A. $ 21 000 B. $ 26 000 C. $ 20 500 D. $ 25 000

13. Closing debtors + payments received from debtors + returns inwards + discount allowed

opening debtors =?

A. bad debt B. capital C. credit sales D. cash sales

14. How are the credit sales calculated?

A. By preparing suppliers account B. By preparing creditors account

C. By preparing sales account D. By preparing debtors account

15. Cash received from debtors can be calculated from:

A. total debtors account B. total creditors account

C. balance sheet D. statement of affairs

Assignment questions:-

Q1. The following information was obtained from the books of a business man who does not

follow the double entry system, for the year ended 31st Dec 2003:-


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$

Trade Debtors 6 900

Bad Debts Provision 400

Premises 50 000

Trade Creditors 5 000

Stock 1 000

Drawings 15 000

Provision for Depreciation on furniture 2 000

Furniture 8 000

Salaries owing 200

Loan from Bank 5 000

Calculate the capital on 31st Dec 2003 by preparing a Statement of Affairs on that Date.

Q2. Rachels Capital on 1st Jan 2003 was $25000 .Her assets and liabilities on 31st Dec 2003were:-

$

Cash in Hand 25

Cash at Bank 560

Long term Bank loan 5 000

Stock in Trade 2 500

Trade Debtors 4 300

Trade Creditors 926

Equipment 6 000

Premises 30 000

Expenses Prepaid 450

Expenses owing 29

Rent received in advance 96

Rent receivable 169

During the year ended 31st Dec 2003, Rachel had withdrawn goods for Private use $3000, and

had paid to the business $5000 from the proceeds of selling her holiday home.

Prepare for Rachel: -

a) A closing statement of affairs at 31st Dec 2003 to find the closing capital

b) A calculation of net profit for the year ended 31st Dec 2003

c) The Capital A/C of Rachel which would appear in her ledger for the year ended 31st Dec2003

Q 3. Frank Bull is a sole trader, who does not keep complete accounting records. However,

for the

year ending 31st Dec 2003 the following information was available:

1) On 1st January 2003: $

Trade debtors 12 400

Trade creditors 15 700

Creditors for expenses 352

2) During the year ended 31st Dec 2003:

Payments received from debtors 1 71 300

Payments made to trade creditors 90 600

Payments made to creditors for expenses 4 820

Cash sales for the year 24 200

Bad debts for the year 750

Purchases on credit of goods for resale 02 300

Cash discount allowed to debtors 2 460

Purchases returns 840


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3) On 31st Dec 2003:



c. Calculate the amount of expense to be transferred to the profit & loss account for

the year ended 31st Dec 2003.

Q4. Harry Johnson, a sole trader does not keep a complete set of accounting records.However, for

the year ended 31st Dec2003, the following information was available: -

1. On 1st Jan 2003 $

Stock 11 400

Trade debtors 9 300



2. During the year ended 31st Dec 2003:-

Purchases on credit of goods for resale 63 000

Purchases returns 750

Payments made to creditors for expenses 8 200

Payments received from debtors 78 000

Cash discount allowed to debtors 3 100

Bad debts written off 1 500

3. On 31st Dec 2003:-

Stock 12 600




From the above information:

Calculate:

i) The credit sales for the year ended 31st Dec 2003

ii) The total payments made to trade creditors for the year ended 31st Dec 2003

iii) The amount of expenses to be transferred to the profit and loss a/c for the year

ended 31st Dec 2003

Q 5. On 1st June 2002, R. Rithas balances were:-

Stock $2600,Bank $4100, Trade Debtors $3500, Trade Creditors $1700, Capital $8500

R. Ritha does not keep full accounting records, but the following information relating to the

year ended 31st May 2003 is available:-

Cheques drawn for private expenditure $6400

Cheques drawn for expense items $5320

Discount Allowed $500

Credit Sales $32500

Cash paid into Bank from Cash Sales $25000

Cheques Received from Trade Debtors $ 26200

Cheques Drawn for Payments to Suppliers $ 39150

Credit Purchases $40300

On 31st May 2003, the closing stock was valued at $2600.

Prepare:

a) For the year ended 31st May 2003: -

b) The Balance Sheet at 31st May 2003

1. Calculate credit sales and the total sales for the year ended 31st Dec 20032. Calculate the amount of closin creditors for the ear ended 31st Dec 2003.

1. The Trade Debtors total account and the Trade Creditors total account.

2. The Trading and Profit and Loss A/C


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Q 7. The following information was obtained form the books of a sole trader, who does not

keep a

full set of books for the year ended 31st Dec 2003:

1) Balances on 1-1-2003:

Cash in hand $ 2 500 Buildings at cost $ 20 000

Cash at bank $ 4 100 Plant & Machinery $ 25 000

Debtors $ 6 400 Creditors $ 4 200

Salaries owing $ 800 Stock $ 3 4002) The following receipts and payments were also recorded by him:

Cash sales banked $ 2 500 4) The balances on 31-12-2003 were:-

Cheques received form debtors $ 12 000 Debtors $ 7 000

Purchases by cash $ 1 500 Salaries owing $ 900

Salaries paid by cheque $ 2 500 Buildings $ 18 000

Administrative expenses in cash $ 1 020 Plant& machinery $ 22 000

Payments by cheque to creditors $ 8 000 Creditors $ 5 200

Cash sales $ 1 800 Stock $ 4 000

Drawings by cheque $ 1 000

3) Other information on 31st Dec 2003:-

week for miscellaneous expenses and the remaining amount only banked.

From the above information, you are required to prepare a set of final accounts for the year

ended 31st Dec 2003.

Q 8. K.King started his business as a retailer on 1st Jan 2002 and put $ 25000 into hisbusiness bank account as his opening capital. He found suitable shop premises at a rent of $

6000 p.a.

payable from 1st January 2002.

All sales were made on a cash basis. Part of the takings was used to pay for various expenses,

business and private, and the remainder was banked.

The following information is available, from his records , even though he did not keep a full set

of accounts under double entry system, for the year ended 31st Dec 2002:-

Sales takings banked 60550

Cheques issued for:-

Shop Fittings & Fixtures 2000

Furniture 4000

Rent 5500

Rates 1200

Insurance 600

Trade creditors 45000

Cash payments from takings

General expenses 2500

Drawings for private expenses 9500

Packing materials 270

Notes at 31-12-2002

1) The stock was valued at $ 6050

2) Discount received from creditors for prompt payments $ 400

3) $ 1800 was owing to creditors.

4) Shop Fittings and Furniture are to be depreciated by 10% p.a.

5) Rates are prepaid by $ 300 and provide for the rent owing at the end of the year.

From the above, prepare the set of final accounts for the year ended 31st Dec 200

Q 9. M, Muthu is a sole trader who does not keep a full set of accounts. The following

summary of

1. Discount allowed $ 250 and discount received $ 300

2. Goods returned by customers $ 380 and goods returned to suppliers $2003. Out of cash sales, he took $ 100 per month for paying rent of the building and $ 15 a


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his bank account for the year ended 31st March 2003 is available from his books :-

Balance on 1-4-2003 400 Payments to creditors 20 000

Receipts from debtors 36 000 Rent 1 200

Cash sales 2 000 Rates 600

Sundry expenses 320

Stationery 150

Drawings 3 000

Balance c/d 3 130

38 400 38 400

All the business takings have been paid into the business bank account except

$ 2500 which was used by M/Muthu for paying wages $ 2000 and personal purpose $ 500.

The following additional information is also available for the year ended 31st March 2003:-

Assets and liabilities 01-04-2002 31-03-2003

Stock - 12 000 14 500

Creditors for goods 3 200 5 000

Debtors for goods 5 000 4 350

Rates prepaid 210 225

Rent owing 150

Fixtures at book value 2 500 2 250

From the above information, you are required to prepare a set of final accounts for the year

ended 31st March 2003.

Show all your workings.

Q10. Silcy is the owner of a sole trading concern who does keep systematic record of his

business transactions, however the following information is available from the records he

maintained for

the year ended 31st Dec. 2000.

Receipts banked $

Cash sales 12 500

Additional capital 5 000

Debtors 10 000

Cheques issued for

Settlement of amount owing to creditors 6 820

Buying cosmetic items for his family 500

Business expenses 1 200

Advertisement 800

Carriage inwards 150

Rent of building 2 000

Purchase of fixtures 6 000

Furniture $ 4 500 Hand Machine $ 3 000

Debtors $ 4 800 Stock of the goods for resale $ 41 800

Rent of building paid in advance $ 200; Creditors for supplies of goods $ 800

On 31-12-2000

Required to:

1. 1. He deposits all cash receipts into his business bank A/C and makes all payments bycheque.

2. 2. During the year he took $ 400 for purchasing packing materials and $ 25 a week forpersonal use out of cash sales.

3. 3. The summary of bank transactions during the year were

1. 4. On 1-1- 2000, the following assets& liabilities were recorded:-

1. The unsold stock was valued at $ 2 100

2. Total amount owed by credit customers was $ 3 1003. The total amount owed to sundry suppliers amounted to $ 2 1004. The annual rent of building payable is $ 2 400

5. Furniture & Fixtures and Hand Machines are to be depreciated by 10% p.a Full yearsdepreciation on fixtures is to be charged.

6. The closing bank balance was $ 9 030.


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Q11. Bobby Saxton is a general dealer. On 1st November 2001, she had the following assetsand liabilities

The only book of account that Bobbie keeps for recording her business transaction is a

cash book. A summary is given below of the entries made in this cash book for the year ended

31st October 2002.

The following matters are to be taken into account:-

$ 39 903

You are asked to do the following for Bobby Saxton.

Incoming search terms:

1. Calculate-opening bank balance. Opening Capital, Credit purchases and Credit sales, Totalsales, Total purchases.

2. Pre are the full set of final accounts for Silc for the ear ended 31st December 2000.

Assets and liabilities $

Equipment 35 865

Stock 14 920

Bank Overdraft 11 562

Cash in hand 576Trade debtors 11 354


Vehicle 9 500

Owing for lighting and heating 300

Capital 57 739

Receipts $

Cash sales 18 240

Received from credit customers 18 830

Payments

Assistants wages 10 940

Rent and rates 8 200

New equipment 2 000

Stock for resale bought for cash 4 200

Paid to trade creditors 19 228Drawings 15 000

Vehicle running expenses 3 590

Heating and lighting 1 328

General expenses 1 271

The stock of goods for resale was valued at $ 11 000 on 31st October 2002. On 31st October 2002, trade debtors and trade creditors were $ 7 806 and 5 600

respectively.

Depreciation for the year:- equipment $ 345, vehicle $ 1 300

Cash in hand on 31st October 2002, amounted to 230 and bank overdraft was

Amounts owing at 31st October 2002: $ 96 for rent and rates: $ 120 for heating andlighting.

1. Show your calculation of the total sales and total purchases to be included in the tradingaccount for the year to 31st October 2002.

2. Prepare trading and profit and loss accounts for the year ending 31st October 2002 and

the balance sheet at 31st October 2002.

incomplete records

single entry and incomplete records in accounting

single entry and incomplete records

Account for incomplete records of a business

incomplete records(accounting)

incomplete sole trader account

incoplete acounting records List out Steps to convert from incomplete records to complete records

mcq related to single entry system

notes on single entry and incomplete records

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Documents

Incomplete Records - Principles of Accounting