Professor Vipin 2014
Unit 9
Accounts from Incomplete Records
Meaning
Accounting records which are not prepared in accordance with double entry system method are
described as accounts for incomplete records.
Salient Features
1.
2.
3.
4.
Apply of personal accounts only (ignores nominal and real accounts)
Maintenance of cash book. (Cash book is prepared)
Based on original vouchers. (Collection of data is made with original vouchers)
Lack of Similarity. (Method of preparation of books differs from firm to firm, it prepared as per
the need of the business.
5. Preparation of final accounts. (After converting the information into double entry system final
accounts are prepared. Due to this Statement of affairs is prepared instead of Balance sheet)
Uses
1.
2.
3.
4.
5.
Easy method (Not requires any specific knowledge)
Economical (Can be prepared by without having more staff)
Suitable for small concerns (Few assets and liabilities are to be recorded)
Not – rigid (Can be modified/changed as per requirement of business)
Easy finding of profit & losses. (Only opening and Closing capital is required)
Limitations
1.
2.
3.
4.
5.
Impossible to find fraud (As Trial balance is ignored)
Incomplete system (No set rules are followed)
Unable to find adequate profit & losses. (Ignorance of nominal accounts)
Difficulty in preparation of balance sheet.(Lack of valuation of goodwill)
Unable to retain full control on asserts. (Real accounts are ignored, it is difficult to make full
control on assets)
6. Unsuitable for planning in control(Lack of reliable figure)
7. Lack of internal checking(Fails to adopt double entry system)
8. Improper evaluation of asserts (Ignorance of certain information like depreciation etc.)
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Professor Vipin 2014
Difference Between Double Entry System and Accounts from Incomplete Records
1. Recording of both aspects (Double entry records every transaction and incomplete records few
transactions)
1. Type of accounts (All accounts are considered in double entry only personal account are
considered in incomplete records)
2. Trial balance (Trial balance is prepared in double entry system, trial balance is not prepared in
incomplete record )
3. Net profit/ loss (Profit/Loss is calculated by preparing trading and profit &loss a/c in double
entry system, Statement of profit is prepared in incomplete records to find the same.
4. Financial position (Balance sheet is prepared in double entry and statement of affairs is
prepared in incomplete records)
5. Adjustment (Adjustment are considered in double entry, while adjustments are not considered
in incomplete records)
Ascertainment of Profit and Loss under Incomplete Records
Liabilities
Bank Overdraft
Bills payable
Sundry Creditors
Outstanding expenses
Income received in advance
Capital (Bal Fig)
Amount
Assets
Cash in Hand
Cash in Bank
Bills receivable
Sundry debtors
Stock
Prepaid expenses
Accrued income
Furniture
Plant and Machinery etc
Amount
Format of Statement of Profit
Closing Capital
Add: Drawings
Less:
Opening Capital
Additional capital introduced
Profit during the year
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Professor Vipin 2014
Example 1
Mr. Ramesh, the owner of a mobile shop maintains incomplete records of his business. He wants to
know the result of the business in 31/12/98 and for that the following information are available:
Particulars
Cash in hand
Bank Balance
Furniture
Stock
Creditors
Debtors
1-Jan-98
300
1500
200
1000
700
500
31-Dec-98
350
1600
200
1300
800
600
During the year he had withdrawn Rs. 1000 for his personal use and invested Rs. 500 as additional
capital. Calculate his profit on 31/12/98
Statement of Affairs as on 1/01/98
Liabilities
Creditors
Capital (Bal Fig) - Opening
Amount
Assets
700 Cash in Hand
Bank Balance
Debtors
Stock
Furniture
3500
Amount
3
15
5
10
2
35
Statement of Affairs as on 31/12/98
Liabilities
Creditors
Capital (Bal Fig) - Closing
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Amount
Assets
800 Cash in Hand
3250 Bank Balance
Debtors
Stock
Furniture
4050
Amount
3
16
6
13
2
40
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Professor Vipin 2014
Statement of Profit as on 31/12/98
Particulars
Closing Capital
Add: Drawings
Amount
3250
1000
4250
500
3750
2800
950
Less: Addl Capital Introduced
Less: Opening capital on 1/1/98
Profit
Note: If opening capital is given but not closing capital, only one statement of affairs will be prepared to
find closing capital.
Example 2
Ravi keeps incomplete records of his business. The following information is available:
Particulars
Bank
Stock in Trade
Sundry Debtors
Furniture
Investment
Cash in Hand
Sundry Creditors
Bills Payable
Loan
31/12/11
4200 (cr)
31/12/12
11200 (dr)
30000
60000
10000
10000
1000
50000
2000
40000
57000
10000
10000
4000
54000
1000
6000
1. Ravi withdrew Rs. 500 each month during first half of the year and Rs. 400 each for the
remaining period of the year.
2. He withdrew Rs. 10000 for his daughter’s fees and Rs. 2000 for his son’s fees.
3. He also used goods worth Rs. 3000 for domestic purposes
4. In October 2010 he received a lottery prize of Rs. 10000 of which Rs. 8000 was invested in the
business
5. He sold his scooter for Rs. 7000 and proceeds were utilized for the business.
6. Furniture is to be depreciated at 10% p.a and provision for doubtful debts is to be created at 5%.
7. He has not paid salary of Rs. 600 and Rent of Rs. 400 was due.
8. Commission earned but not received was Rs. 4800.
Find the profit and redraft statement of affairs.
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Professor Vipin 2014
Combined Statement of Affairs as on 01/01/12 and 31/12/12
Liabilities
Bank OD
Sundry Creditors
Bills Payable
Loan Borrowed
Capital (Bal Fig)
1/1/2012 31/12/2012
4200
50000
54000
2000
1000
6000
54800
71200
111000
Assets
Bank
Stock in Trade
Sundry Debtors
Furniture
Investment
Cash
1/1/2012 31/12/2012
11200
30000
40000
60000
57000
10000
10000
10000
10000
1000
4000
111000
111000
111000
Statement of P&L as on 31/12/12
Particulars
Closing Capital
Add: Drawings Made
Cash: Jan to Jun 500x6
Jul to Dec 400x6
Daughter Fees
Son Fees
Goods
Less: Additional Capital Introduced
Lottery
Sale Proceeds of Scooter
Amount
Amount
71200
3000
2400
10000
2000
17400
3000
8000
7000
Adjusted Closing Capital
Less: Opening Capital
Gross Profit
Less: Expenses and Losses
Provision for doubtful debts
(57000x5%)
Depreciation on Furniture (10000x10)
Outstanding salary
Outstanding rent
Add: Incomes and Gains
Commission earned but not received
Net Profit
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20400
91600
15000
76600
54800
21800
2850
1000
600
400
4800
4850
16950
4800
21750
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Professor Vipin 2014
Revised Statement of Affairs as on 31/12/2012
Liabilities
Creditors
Bills Payable
Loan
Outstanding
Salary
Capital:
Add: Addl Capital
Net Profit
Less: Drawings
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Amount
54800
15000
21750
91550
20400
Amount
54000
1000
6000
Assets
Bank
Stock
Sundry Debtors
600 Less: Prov
400 Furniture
Less: Depreciation
Investments
Cash
Commission earned not
71150 received
133150
Amount
Amount
57000
2850
10000
1000
54150
9000
10000
4000
4800
133150
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