Incomplete Records

Incomplete Records
For many small businesses, they do not
maintain a full set of double-entry books.
All they keep are just invoices and bank
statement.
The preparation of the profit and loss
account and balance sheet in
circumstances where the bookkeeping
records are inadequate or incomplete.
Reason for incomplete record
Lack of accounting experience to
maintain records.
Cash misappropriated by the assistant.
Goods stolen or lost by fire.
Trading and profit and loss
account
 T. Lee
Trading and Profit and Loss Account
for the year ended
$ $
Sales (1) x
Less: COGS
Opening stock x
Add: Purchase(2) x
Less: closing stock x x
Gross Profit (3) x
Add: Discount received (4) x
x
Less: Expenses (5)
Rent x
Light x x
x
 Working 1:

Sales = Cash Sales + Credit Sale

NEXT
Cash Sales
Cash Sales  may be found in cash book
Cash book may be prepared
to update the cash book and reconcile
the cash book balance with the bank
statement balance.
to identify any missing figures e.g.: cash
sales, sundry expenses, cash drawings
and cash misappropriated. NEXT
 Credit Sales
Credit Sales  to be found in Total Debtors
Account
 to use accounting ratio

BACK
Working 2:
Purchases = Cash Purchases + Credit
Purchases

NEXT
Cash/Credit purchases
Cash Purchases  may be found in
cash book.
Credit Purchases  Total Creditors
Account
 to use accounting
ratio

BACK
Working 3:
Gross Profit
• To use ratios such as mark-up and
margin to find gross profit figures
• Then use gross profit figures to find
missing figures. (e.g.: purchases, cost
of good sold, closing stock, etc.)

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Introduction of accounting
ratios
1. Mark-up
2. Margin

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Mark-up:
Refer to profit which expressed as a
fraction or percentage of the cost price.
Margin;
Refer to profit which expressed as a
fraction or percentage of the selling
price.

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Mark-up = Profit (P)
X 100%
Cost of Goods Sold (C)

Margin = Profit (P) X 100%

Sales (S)

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Relationship of 2 ratios
 Example 1
Mark-up is 20%, what is margin?
Mark-up: 20  Margin: 20
100 100+20

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 Example 2
Margin is 25%, what is mark-up?
Margin: 25  Mark-up: 25
100 75

BACK
Working 4:
Income earned
= Cash received + Prepaid last year –
Accrued last year –Prepaid this year +
Accrued this year

BACK
Working 5:
Expenses incurred
= Cash paid + Prepaid last year – Accrued
last year – Prepaid this year + Accrued
this year

BACK
Balance Sheets
Balance Sheet
Net Profit
= Closing capital – Opening capital +
Drawings – Capital introduced
Opening capital Balance
= Opening assets – Opening liabilities
Sometimes, statement of Affairs need to
be prepared in order to find out the
opening capital balance.
 Example
Balance Sheet at 31 June 19-1 (extracts)
Stock $2000
Debtors $2000
Creditors $ 1000
During this period: $
Receipts from debtors 6000
Cash Sales 1000
Payment to creditors 4000
Payment to Rent 500
At 30 June 19-2: Debtors $1000
Creditors $1000
Mark-up 20%
Accrued at 30 June 19-2 $200
Prepare final accounts for the year ended 30 June
19-2.
 Trading and profit and loss account for the year ended 30 June 19-2
$ $

Sales (Working 1) 6000

Less: COGS
Opening stock 2000
Add: Purchase (Working 2) 4000
6000
Less: closing stock 1000 5000
Gross profit (Working 3) 1000
Less: Expenses
Rent (500 + 200) 700
Net Profit 300
 Working 1

Total Debtors
Bal b/d 1000 Cash 6000
Sales (bal. fig.) 5000 Bal c/d 1000
7000 7000

Sales = Cash Sales + Credit Sales

= 1000 + 5000
= $6000
BACK
 Working 2

Total Creditors
Cash 4000 Bal b/d 1000
Bal c/d 1000 Purchase (bal.fig.) 4000
5000 5000

Sales = Cash Purchases + Credit Purchases

= 0 + 4000
= $4000
BACK
 Working 3

Mark-up  Margin
20  20
100 100+20

Sales = Cost + Profit

6000 = x + 6000 * 20/120
6000 = x + 1000
x = 5000

BACK
Further Example
Stock loss
Stock loss (e.g. $1000) without insurance claim
 Dr. Profit and loss $1000
 Cr. Trading $1000
Stock loss (e.g. $1000) with insurance claim
(e.g. $800)
 Dr. Bank $800
 Dr Profit and loss $200 (net loss)
 Cr Trading $1000
Balance Sheet at 31 June 19-1 (extracts)
Stock $23750
Debtors $16000
Creditors $11520
During this period: $
Receipts from debtors 61000
Cash Sales 17220
Payment to creditors 59630
Payment to expenses 4000
At 30 June 19-2: Debtors $18780
Creditors $14210
The firm achieves a mark-up of 25% on all cost.
The warehouse has burned down and all the stock
was destroyed.
The insurance company gives $15000 for
compensation for stock loss.
 Trading and Profit for the year ended 30 June 19-2
$ $
Sales (17220+61000+18780-16000) 81000
Less: COGS
Opening stock 23750
Add: Purchase (59630+14210-11520) 62320
86070
Less: Fire loss [3] (21270) 64800 [2]
Gross profit (81000 * 25/125) 16200 [1]
Less: Expenses
Expenses 4000
Fire loss (21270-15000) 6270 10270
Net Profit 5930