Chapter 13
Single Entry:
Incomplete Records
Introduction
•
Incomplete records are normally prepared by businesses which lack
professional management or businesses whose accounting records have
been destroyed during the period. All the records that these businesses
may have are:
1. Balance of assets and liability accounts at
the start and end of an accounting period.
2. Information on cash spent and received
during an accounting period.
Net profit from assets and liability
account balances
The change in the capital balance of a business from the start of an
accounting period to the end is due to:
Additional capital invested by owner during the period
Net profit or loss for the period; and
Drawings taken.
Net profit from assets and liability
account balances
Capital (total assets less liabilities) at start of period
add Capital introduced during the period
add Net profit (loss)
less Drawings
= Capital (total assets less liabilities) at end of period
X
X
X
(X
X
NB Capital at close add drawing less capital at start less capital
introduced = Net profit (loss)
Preparing the
Income Statement
The format is the same as in business which use full double entry. However,
instead of using a Trial Balance, a cash book (amounts received and
spent) and asset and liability balances at the start and end of an
accounting period are used in single entry businesses
Interpreting the Cash book
Item
Receipts from sales/income
Receipts from loans
Receipts from debtors
Payments for expenses
Payments for assets
Payment to creditors
dr
dr
dr
cr
cr
cr
Side
Preparing the Income Statement
Once opening and closing balances for trade debtors are given, a
debtors/sales ledger control accounts must be prepared to calculated
credit sales.
The value for credit sales must be added to cash sales if any and used in
the Income Statement.
Note that cash sales are not the same as receipts from debtors.
Preparing the Income Statement
Sales/debtors ledger control account
Bal b/d (debtors balance at start)
x
Bal b/d (debtors overpaid at start)
x
Credit sales (balancing figure)
x
Cash/Bank (receipts from customers)
x
cash/bank (refunds to customers)
x
Cash discounts allowed
x
NSF/ dishonoured cheques
x
Bad debts
x
Sales return/return inwards
x
Contra-entry (set off)
x
Bal c/d (debtors balance at close)
x
Bal c/d overpayment at close)
x
x
x
Preparing the Income Statement
Once opening and closing balances for trade creditors are given, a
creditors/purchases ledger control accounts must be prepared to
calculated credit purchases.
The value for credit purchases must be added to cash purchase if any and
used in the Income Statement.
Note that cash purchases are not the same as payments to creditors.
Preparing the Income Statement
Purchases/creditors ledger control account
Bal b/d (overpayment balance at
start)
x
Bal b/d (suppliers balance at start)
x
Cash/Bank (payments to creditors)
x
Credit purchases (balancing figure)
x
Cash discounts received
x
Cash/bank (refunds from suppliers)
x
Returns outwards/purchases returns
x
Contra-entry (set off)
x
Bal c/d (creditors at close)
x
Bal c/d (overpayment to credit at close)
x
x
x
Preparing the Income Statement
Depreciation expense, a non cash expense, must be calculated
by subtracting the fixed asset value at close from the value of the
fixed asset at start. The reduction is depreciation expense. This
must only be done if the rate of depreciation is not given in a
question.
Preparing the Income Statement
Remember an expense under the accrual basis represents not the cash
paid but the amount that must be paid for the accounting period. The
account bellows shows how cash expense is to be adjusted if there are
amount prepaid or owing.
$
$
Prepaid b/d (start)
x
Owing b/d (start)
x
Cash/bank (expense paid)
x
P&L (balancing figure)
x
Owing c/d (close)
x
Prepaid c/d (close)
x
x
x