ACCOUNTING FOR INCOMPLETE RECORDS.
(SINGLE ENTRY ACCOUNTING)
This is a system of book keeping in which the dual aspect of transactions is ignored and in which personal accounts are maintained. Any system which is not a complete double entry system is known as a single entry system. Common features of all incomplete records question is the concept of missing figures. Figures are obtained by applying the basic principles of double Entry.
The main questions based on incomplete record are:
Those requiring a computation of figures based on incomplete records.
Those requiring the production of the final account from the cash book.
Computation of Profits
Net asset basis uses the principal of fundamental accounts equation to build up asset of accounts and calculate the profit figure.
PROFIT=Increase in Assets+Drawings-Additional Capital-Increase in other liabilities.
Net Worth of Business.
Is the net value of assets which belong to the proprietor any increase in capital represents increase in net value of assets.
NOTE: If there are no drawings, no additional capital introduced by proprietor then this increase is due to the net profit earned during this particular period.
Final accounts from incomplete records.
The following steps are taken in preparing final accounts from incomplete records
Statement of affairs : To find out the opening capital, statement of affairs is prepared Total Assets-Total Liabilities = Capital at the start of the accounting period.
Reconstruction of accounts: From the information given, debtors and creditors control account can be used to determine the amount of sales and purchases respectively. From the information given, the missing figures are obtained by constructing control account. These acc are reconstructed by applying the double entry concept to the available information. Cash and bank account is reconstructed to find out the balance at bank.