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Chapter 11 - Incomplete Records - 1.3
Chapter 11 - Incomplete Records - 1.3
1. It is suitable to small concerns which have mainly cash transactions and do not have
many assets and liabilities to be recorded in detail.
2. This system is economical since lesser number of books is maintained.
3. Lack of knowledge about double entry system.
4. Ignorance of businessman to the statutory requirements of keeping proper books of
accounts.
5. Intentional omission to take advantage of taxation.
Particulars Amount
Capital at the end of the year xxx
Add: Drawings during the year xxx
xxx
Less: Additional Capital Invested xx
xxx
Less: Capital at the beginning xxx
Profit or loss during the year xxx
2. Preparation of Profit and Loss account and Balance Sheet under Conversion
Method -
To prepare trading and profit and loss account and the balance sheet, we need complete
information regarding expenses, incomes, assets and liabilities. In case of incomplete records,
details of some items like creditors, cash purchases, debtors, cash sales, other cash payments
and such receipts are easily available, but there are a number of items that are missing and
have to be worked out from various sources. They are as follows:
1. Opening Capital - It can be ascertained from the statement of affairs at the beginning
of the year.
2. Credit purchases – It is calculated by preparing the total creditors account. (See the
format in text book).
3. Credit sales – It can be traced out with the help of a total debtors account. (See the
format in text book).
4. Bills receivable – by preparing total bills receivable account. (See the format in text
book).
5. Bills payable – by preparing total bills payable account. (See the format in text book).
6. Other missing information through summary of cash – In case the amount paid to
creditors or the amount received from debtors or the opening or closing cash or bank
balance may be missing, we may prepare a cash book summary showing all receipts
and payments during the year and balancing figure is taken as the amount of missing
item.
After the missing figures have been traced out, the final accounts may be prepared
straight away or after the preparation of trial balance.
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