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 this case, 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:

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 Account Balance b/f *** Cash sales banked *** Cash sales ? Purchases *** Other cash receipts Drawings *** Expenses *** Balance c/d *** *** *** Balance b/d ***

Total Sales = Credit sales + Cash sales

• Margin and markup may be used to calculate sales, gross profit and cost of sales
 Example If Margin = 25% Then Gross Profit = 25/100 * Sales Cost of sales= 75/100 * Sales Example If Markup = 20% Then Gross Profit = 20/100 * Cost of sales Gross Profit = 20/120 * 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.

Worked Example

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 1 400 Payment to suppliers 56 970 Cash sales banked 8 530 General expenses 76 830 Receipts from customers 145 570 Equipment 20 000 Balance c/d 1 700 155 500 155 500

• The following payments were made out of cash sales:

Purchases                             \$ 8 430

Drawings                             \$ 16 500

General Expenses              \$ 32 780

• Discount allowed and received were \$ 500 and \$ 900 respectively

Required

1. Income statement for the year ended 31st December 2017
2. Statement of financial position as at 31st December 2017.

Step 1 - Calculate capital at start

 Statement to calculate capital as at 1st January 2017 \$ \$ Assets Property - cost 80 000 Equipment - NBV 23 000 Inventory 12 000 Trade receivables 8 000 Cash 1 050 General expenses Prepaid 200 Bank 1 400 125 650 Less Liabilities 15% Bank Loan 28 000 Trade payables 6 200 General expenses Due 300 (34 500) Capital at start 91 150

Step 2 - Calculate total sales

 Trade receivables Account Balance b/f 8 000 Receipts 145 570 Credit sales 146 570 Discount Allowed 500 Balance c/d 8 500 154 570 154 570 Balance b/d 8 500 Cash Account Balance b/f 1 050 Cash sales banked 8 530 Cash Sales 65 640 Purchases 8 430 Drawings 16 500 General Expenses 32 780 Balance c/d 450 66 6990 66 690 Balance b/d 450

Total sales  = Credit sales + cash sales  = 146 570 + 65 640 = \$ 212 210

Step 3 - Calculate total purchases

 Trade payables Account Payments 56 970 Balance b/f 6 200 Discount Received 900 Credit 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 200 Balance b/f 300 Cash 32 780 Income Statement 109 210 Bank 76 830 Balance c/d 450 Balance c/d 150 109 960 109 960 Balance b/d 450 Balance b/d 150

Step 5 - Depreciation charged to income statement

 Equipment at NBV Account Balance b/f 23 000 Disposal *** Acquisition 20 000 Depreciation 6 000 Balance c/d 37 000 43 000 43 000 Balance b/d 37 000

 Income Statement for the year ended 31st December 2017 \$ \$ Revenue 212 210 Less Cost of sales Opening inventory 12 000 Purchases 66 000 Less closing inventory (10 000) Cost of sales (68 000) Gross Profit 144 210 Discount received 900 145 110 Less Expenses Depreciation on Equipment 6 000 Discount allowed 500 General expenses 109 210 Interest on bank loan(15/00*28000) 4 200 119  910 Profit for the year 25 200

 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 21 100 Total Assets 138 100 Equity Capital at start 91 150 Add Profit for the year 25 200 Less Drawings (16 500) Owner's capital 99 850 Non-current liabilities 15% Bank Loan 28 000 Capital Employed 127 850 Current Liabilities Trade payables 5900 Other payables : General Expenses due 150 Other payables : Interest on loan due 4200 10 250 Equity and Liabilities 138100

Q1. The following information is provided by Mr. Khan for the year ended 31st December 2015

 1st Jan 2015 31st Dec 2015 Plant and machinery 35 000 45 000 Fixtures and fittings 23 000 20 700 Trade receivables 18 500 19 650 Trade payables 14 300 12 450 Insurance - Prepaid 300 450 Insurance - Due 150 750 Wages and salaries - Prepaid 1 200 3 600 Wages and salaries - Due 2 400 600 Inventory 4 800 3 550 Cash 450 750

 DR                                                                         Bank Account                                                                         CR Balance b/f 11 550 Payment to suppliers 23 000 Receipts from credit customers 54 000 Plant and machinery 15 000 Cash sales banked 3 500 Insurance 1 500 Wages and salaries 12 000 Drawings 4 000 Purchases 2 000 Balance c/d 11 550

1. The following were paid in cash prior to cash sales banked

General expenses             \$ 1 500

2. Fixtures and fittings were depreciated by \$ 2 300

Required:

1. Income statement for the year ended 31st December 2015
2. Statement of financial position as at 31st December 2015

Q2. The following information is provided by Ms Cherie for the year ended 31st March 2016.

 1st Apr 2015 31st Mar 2016 Office equipment 5 000 4 000 Property 43 000 40 000 Trade receivables 28 500 29 350 Trade payables 15 800 13 550 Electricity - Prepaid 200 400 Electricity - Due 100 800 Advertising - Prepaid 1 000 3 000 Advertising - Due 2 000 500 Inventory 9 400 5 500 Cash 400 600 5% Bank loan 6 000 6 000

 DR                                                                           Bank Account                                                                           CR Balance b/f 12 300 Payment to suppliers 53 000 Receipts from credit customers 78 000 Office equipment 500 Cash sales banked 5 500 Advertising 5 500 Electricity 2 000 Purchases 5 000 Drawings 4 500 Balance c/d 25 300

1. The following payments were made out of cash sales

General expenses           \$ 3 500

Insurance                            \$ 700

2. Property is depreciated by \$ 3000.

3. Interest on loan is still due.

REQUIRED

• Income statement for the year ended 31st March 2016
• Statement of financial position as at 31st March 2016.