Incomplete Records
Incomplete Records: where an organization (usually a small business or a non-profit making
organization) has less than a full double-entry accounting system.
Many businesses especially small sole traders will not even have a cashbook and will do little
more than collect all their receipts and bank statements, which they then pass to an accountant at
the end of the year.
Many other small businesses operate a single-entry system around a cashbook, which records all
their payments and receipts in one location.
Although operating a single-entry system may suit the owners of many small businesses, it will
still be important to keep track of drawings and the owner will need to know how much capital
expenditure takes place so depreciation can be calculated. Adjustments also need to be made for
prepaid and accrued income and expenses.
Single-entry and almost non-existent records are therefore referred to as incomplete records.
Differences between Single-Entry and Double-Entry
Single Entry Double Entry
1. Only one aspect of a transaction – either the debit or the credit is recorded in the journal.
1. Equal debits and credits are always entered in the journal.
2. Only personal accounts such as debtors and creditors accounts and capital account for the
owner are kept. 2.Provides ledger accounts for all assets, liabilities, capital, income and
expenses.
3. The books are limited to a journal, a cashbook and a ledger. 3.The books include a
general journal and a number of specialized journals example:-purchases, sales and returns.
General ledgers as well as subsidiary ledgers such as debtors’ and creditors’ ledgers are also
included.
4. Only the debit or credit of a transaction is recorded hence, accounting records are
incomplete. 4. Complete records are maintained for all accounting transactions.
There are FIVE STEPS used when preparing Incomplete Records:
1. Prepare a Statement of Affairs to find the Opening Capital.
This statement lists all the assets and liabilities of a business on a certain date so that the
accounting equation can be used: Capital = Assets - Liabilities
Calculating the profit or loss for the year using the Statement of Affairs
The capital calculated for the beginning of the financial year can then be compared to the capital
at the end of the year, and , when drawings are taken into account, the difference will be the
profit:
Capital at the end of the financial year $ xx
less capital at the start of the financial year <xx>
add drawings for the year xx
Profit for the year xx
Statement of Affairs is a basic balance sheet listing assets and liabilities and often used to find
the value of capital.
2. Find the closing balance for the bank account or cash account (IF NOT GIVEN)
3. Prepare the
(i) SALES LEDGER CONTROL ACCOUNT
To calculate the credit sales for the period using
opening receivables (debtors) at the start of the period
closing receivables (debtors) at the end of the period
cash received during the period from credit customers
(found in the cashbook on the debit side)
discount allowed (found in the cashbook) and returns inwards (if any)
The CREDIT SALES and CASH SALES (if any) is added together for the
TOTAL SALES
(ii) PURCHASES LEDGER CONTROL ACCOUNT
To calculate the credit purchases for the period using
opening payables (creditors) at the start of the period
closing payables (creditors) at the end of the period
cash paid during the period to credit suppliers
discount received and returns outwards (if any)
The CREDIT PURCHASES and CASH PURCHASES (if any) is added together for the
TOTAL PURCHASES.
(iv) Calculating depreciation from incomplete records
Sometimes, however, there will be no guidance about depreciation policies, and in
these situations depreciation should be based on comparing the closing value of a
non-current asset with the opening value. The difference is normally the depreciation
charge, but it is always necessary to check that no additions have been made to the
non-current asset during the year.
(v) Calculating the amount for expenses in the Income Statement from the
Statement of Affairs where there are adjustments.
Often the information about expenses is contained within the bank account and the list
of balances used to produce a statement of affairs. The amount within the bank
account is purely the amount paid during the year and not the amount that should be
recorded within the Income Statement. This is because it does not take account of the
amounts prepaid or accrued at the year end, and possibly also at the beginning of the
year.
At start of the year At end of the year
Prepaid expenses + -
Accrued expenses - +
