1. Prepared by: NAME: PN NURSHAMIMI BINTI SABLI ROOM: L2 60 TEL
NO: 09-460 2445 / 013 2226491 EMAIL: [email protected]
INCOMPLETE RECORDS & SINGLE ENTRY (SOLE TRADER)
2. LEARNING OUTCOMES Differences between single entry and
Incomplete records Identify the weaknesses of incomplete records.
Determine profit using the comparison method and analysis method.
The use of mark-up and margin to ascertain profit or loss Prepare a
statement of affairs. Preparation of the Financial Statements 3.
INTRODUCTION Incomplete records normally happen to small businesses
they have accounting records but do not maintain according to
double entry principles. This is known as single entry system and
results to incomplete records Incomplete records can happen due to:
Keeping only certain books of accounts (eg. Cash book & cheque
butts) to record money received and paid Even if there is complete
set of books, some of the records may be lost, destroyed or
misplaced 4. WEAKNESSES OF INCOMPLETE RECORDS 1 Profit or loss is
difficult to be ascertained when preparing the normal income
statement insufficient info. on revenues and expenses 2 Difficult
to determine current financial position as a result of incomplete
info. on assets and liabilities 5. METHODS TO DETERMINE PROFITS
FROM INCOMPLETE RECORDS COMPARISON METHOD ANALYSIS METHOD Quick
method to determine estimated profit without preparing income
statement Used when very limited or no records available (only have
estimates of assets & liability balances) Profit/(losses) =
owners equity at the end owners equity at the beginning Increase in
OE profit; while decrease in OE losses To determine OE at the
beginning and end of the period:- OE = ASSETS LIABILITIES This is
done by preparing Statement of Affairs equivalent to balance sheet
/ SOFP Used when info. Available consists of > the estimates of
assets and liability balances. Details of cash receipts and
payments may be obtained through cash book but not for sales,
purchases, expenses and revenues. Hence, Need to reconstruct ledger
a/c to obtain the missing info. Then, statement of comprehensive
income will be prepared in order to find the net profit 6.
COMPARISON METHOD STATEMENT OF AFFAIRS A statement showing an
estimated assets and liabilities of business at a particular date
(2 statements 1. for the beginning and 2. for end of period) Owners
equity will be the balancing figure between the total assets and
liabilities. After statement of affairs for both period have been
prepared, profit or loss for the period is ascertained by preparing
Statement of Profit or Loss (Income Statement @ Statement of
Comprehensive Income) 7. STATEMENT OF AFFAIRS Statement of Affairs
as at XXX RM RM ASSETS (Both NCA & CA) Land xxx Building xxx
Motor vehicle (on MV) xxx Office Equipment (on MV) xxx Cash / Bank
xxx A/c Receivable xxx Prepaid Expenses xxx Accrued revenues xxx
xxx LIABILITIES (Both NCL & CL) A/c payable xxx Accrued
expenses xxx Prepaid revenues xxx Bank overdraft xxx Bank loan xxx
xxx CAPITAL / OWNERS EQUITY xxx 8. STATEMENT OF PROFIT OR LOSS Mr A
Statement of Profit or Loss for the year ended XXX RM Owners equity
at the end xx Add: Drawings during the year (if any) xx Less:
Additional capital (if any) (xx) Adjusted owners equity at the end
xx Less: Owners equity at the beginning (xx) Net profit for the
year xx BASIC PRINCIPLE: OE at the end = OE at the beginning +/-
Profits/(losses) + Additional Capital - Drawings 9. ANALYSIS METHOD
RECONSTRUCTION OF LEDGER A/C Reconstruct: Trade receivables control
a/c to find credit sales & payment received during the year
Trade payables control a/c to find credit purchases & payment
made during the year Cash book to find closing balance, cash sales
& purchases, drawings etc. Expenses & revenue a/c to find
expenses incurred and revenues earned for the year (both charged
and recognised in IS) Non current asset a/c to find depreciation,
acquisition & disposal during the year 10. RECONSTRUCTION OF
LEDGER A/C Trade receivables control a/c Bal b/d xx *Ct sales xx
Bank xx Disc allowed xx Bad debts xx R.Inwards xx Bal c/d xx Trade
payables control a/c Bank xx Dis rcievd xx R.Outward xx Bal c/d xx
Bal b/d xx *Ct purchases xx Cash book Bal b/d xx *Cash sale xx Sale
of NCA xx Income Received xx *Cash purchase xx Trade payable xx
*Cash drawing xx Expenses paid xx Purchase of NCA xx Bal c/d xx 11.
RECONSTRUCTION OF LEDGER A/C Expenses a/c Prepayment b/d xx Bank xx
Accrual c/d xx Accrual b/d xx *IS xx Prepayment c/d xx Revenues a/c
Accrual b/d xx *IS xx Prepayment c/d xx Prepayment b/d xx Bank xx
Accrual c/d xx NCA a/c (MV/CV) Bal b/d xx Acquisition xx
*Depreciation xx Bal c/d xx *Expenses (IS) = prepaid b/d + bank +
accrued c/d prepaid c/d accrued b/d *Revenues (IS)= prepaid b/d +
bank + accrued c/d prepaid c/d accrued b/d *If given cost of the
assets, construct ledger as usual in topic 3 especially when there
is disposal 12. PROFIT DETERMINATION: MARGIN vs MARK-UP Helpful to
find missing info. relating to sales & purchases when there is
> 1 missing info. MARGIN: gross profit expressed as a % of sales
MARK-UP: gross profit expressed as a % of cost of sales If gross
profit % is the MARGIN, then make SALES = 100% If gross profit % is
the MARK-UP, then make COST OF SALES = 100% Margin = Gross profit /
sales x 100% Margin = Gross profit / cost of sales x 100% 13.
PROFIT DETERMINATION: MARGIN vs MARK-UP Eg. For MARGIN. A gross
profit margin of 25% is made on sales. Cost of sales = RM12,000.
Compute gross profit and sales. Sales (RM?) Cost of Sales
(RM12,000) = Gross Profit (RM?) 100% - 75% = 25% Hence, Gross
profit = RM12,000 / 75% x 25% = RM4,000 Sales = RM12,000 + RM4,000
= RM16,000 14. PROFIT DETERMINATION: MARGIN vs MARK-UP Eg. For
MARK-UP. A gross profit mark-up is 20%. Cost of sales = RM10,000.
Compute gross profit and sales. Sales (RM?) Cost of Sales
(RM10,000) = Gross Profit (RM?) 120% - 100% = 20% Hence, Gross
profit = RM10,000 / 100% x 20% = RM2,000 Sales = RM10,000 + RM2,000
= RM12,000 15. FORMAT OF FINAL EXAM QUESTION Combination of both
Comparison and Analysis Method Preparation of: 1. Statement of
Affairs 2. Statement of Comprehensive Income 3. Statement of
financial position
