Incomplete Records


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 case of a cash basis business, the profit of a business may be calculated as follows:

Statement of Profit / (Loss)

$

Capital at end (Closing Capital)

****

Less Capital at start (Opening Capital)

(**)

Less Additional capital

(**)

Add Drawings

**

Profit / (Loss)

***


A statement of affairs is prepared at start and at end of the year to show opening and closing capital. A statement of affairs simply shows assets and liabilities. In other cases, 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 stolen

Cash Account

Balance b/f

***

Cash sales banked

***

Cash sales

?

Purchases

***

Other cash receipts


Drawings

***



Expenses

***



Cash Stolen

?



Balance c/d

***


***


***

Balance b/d

***




Note: Cash stolen must be recorded as an expense in the income statement

Total Sales = Credit sales + Cash sales

  • Margin and markup may be used to calculate sales, gross profit and cost of sales

If Margin = 25%

Then

Gross Profit = 25/100 * Sales




Cost of sales= 75/100 * Sales



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. (Chapter IAS 16)

Worked Example 1 - Incomplete Records – Cash Stolen

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


Additional information:

  • Cash sales amounted to $67 240
  • The following cash payments were made:

Purchases                           $ 8 430

Drawings                             $ 16 500

General Expenses           $ 32 780

  • Nikhil suspects that an amount of cash has been stolen from the cash till.
  • Discount allowed and received were $ 500 and $ 900 respectively
  • Nikhil withdrew goods valued at $ 1 800 for his own use. No records were made

Required             a) Income statement for the year ended 31st December 2017

                                b) Statement of financial position as at 31st December 2017.

Step 1 - Calculate capital at start

Assets  = 80 000 + 23 000 + 12 000 + 8 000 + 1 050 + 200 + 1 400 = 125 650

Liabilities = 28 000 + 6 200 + 300 = 34 500

Capital = 125 650 – 34 500 = 91 150


Step 2 - Calculate total sales / cash stolen

Trade receivables Account

Balance b/f

8 000

Receipts

145 570

Credit sales

146 570

Disc. 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

67 240

Purchases

8 430



Drawings

16 500



Gen. Expenses

32 780



Cash stolen

1 600



Balance c/d

450


68 290


68 290

Balance b/d

450




Total sales  = Credit sales + cash sales = 146 570 + 67 240 = 213 810

Step 3 - Calculate total purchases

Trade payables Account

Payments

56 970

Balance b/f

6 200

Disc. 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 Stmt.

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






Income Statement for the year ended 31st December 2017

$

$

Revenue


213 810

Less Cost of sales



Opening inventory

12 000


Purchases

66 000


Less drawing of goods

(1 800)


Less closing inventory

(10 000)


Cost of sales


(66 200)

Gross Profit


147 610

Discount received


900



148 510

Less Expenses



Depreciation on Equipment

6 000


Discount allowed

500


General expenses

109 210


Interest on bank loan(15/00*28000)

4 200


Cash stolen

1 600

121 510

Profit for the year

 

27 000


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

21100

Total Assets


138100

Equity



Capital at start


91150

Add Profit for the year


27000

Less Drawings (16500+1800)


(18 300)

Owner's capital


99850

Noncurrent liabilities



15% Bank Loan


28000

Capital Employed


127850

Current Liabilities



Trade payables


5900

Other payables : Gen. Expenses due


150

Other payables : Interest on loan due


4200

Equity and Liabilities


138100