PFA1173

TOPIC 5:
INCOMPLETE RECORDS
SUBTOPICS
 LEARNING OUTCOMES:
• Identify the weakness of incomplete record.
• Determine profit using the comparison method and analysis method.
• Construct statement of comprehensive income and statement of financial
position.
 INTRODUCTION
• All business transactions have recorded based on a double entry system.
HOWEVER

*For Small business, such system may not be in existence due to lack of accounting
knowledge and expertise.
*They may not be maintained according to double entry principle.
*Example: only keep a cash book to record money received and money paid.
In this situation, the business is said to be using a single entry system.
• On the other hand, if there is a complete set of books maintained in
larger business, some of the accounting records may be lost, destroyed
or misplaced.
• This would result in incomplete records.
• In an incomplete record situation, profit or loss cannot be ascertained
easily by preparing SOCI in the normal way.
• This is because no information is readily available on all expenses and
revenues.
• SOFP may not also be easily determined since information on the assets
and liabilities may be incomplete.
5.1 THE DIFFERENCE BETWEEN A SINGLE ENTRY
SYSTEM AND A DOUBLE ENTRY SYSTEM
5.2 THE DISADVANTAGES OF A SINGLE
ENTRY SYSTEM
5.3 DISTINGUISH BETWEEN COMPARISON
AND ANALYSIS METHOD
METHODS OF DETERMINING
PROFIT /LOSS

1. Comparison method
2. Analysis method
 5.4 COMPARISON METHOD
• Most probably used when there are very limited records available or
even no record at all.
• Profit or loss may be determined by comparing owner’s equity at the
end of a period to that at the beginning of the period. Any increase or
decrease in owner’s equity would represent profit or loss made over the
period.
1)Owner’s equity at the beginning: A – L
2)Owner’s equity at the end : A – L
3)*Net profit / loss : OE (end) – OE (beginning)
* if no additional capital invested by the owner
OR
no drawings made by the owner during the year
 EXAMPLE:
• Siti, a sole trader does not keep proper records of her business transactions but the
valuation of her assets and liabilities are estimated as follows:

31 December 2020 31 December 2021

RM RM
Furniture 6,500 5,900
Vehicles 25,000 32,000
Account receivables 8,400 10,500
Account payables 5,600 6,800
Inventory 4,900 3,600
Cash at bank 3,800 10,800
Accrued utility 900 600
• If the owner had made a further capital contribution and drawings during
the period:
• OE (end) = OE (beginning) +(-) profit/loss + Additional
capital - Drawing
 5.5 ANALYSIS METHOD
• The analysis method is used where the information available consists of
more than the estimates of asset and liability balances.
• Owner may have kept some records such as details of cash receipts and
cash payments.
• BUT some of the information may not be readily available , so ledger
accounts may need to be reconstructed to obtained missing information.
• For example: trade payables control account may need to be constructed
to find the missing figure for credit purchases.
 RECONSTRUCT OF LEDGER ACCOUNT
• Reconstruct trade receivables control account to find missing information such as
credit sales and collection received during the year.

Trade Receivables Control Account

Balance b/d X Receipts X

Credit sales X Discount allowed X

Bad debts X

Sales return X

Balance c/d X
 EXAMPLE:
• Find the amount of credit sales from the following information:
RM
Trade receivables at 31 Dec 2021 7,000
Trade receivables at 31 Dec 2020 10,000
Sales returns 500
Receipts from trade receivables 15,800
Discount allowed 200
Bad debt written off 300
• Reconstruct trade payables control account to find missing information such as
credit purchases and payments made during the year.

Trade Payables Control Account

Payments X Balance b/d X

Discount received X Credit purchases X

Purchases return X
 EXAMPLE:
• Find the amount of credit purchases from the following information:
RM
Trade payables at 31 Dec 2021 8,000
Trade payables at 31 Dec 2020 5,000
Payments to trade payables 6,300
Discount received 300
Purchases returns 400
 • Reconstruct cash book to find missing information such as closing balance, cash
purchases, cash sales and cash drawings.

Cash Book Account

Balance b/d X Balance b/d (overdraft) X

Cash sales X Cash purchases X

Collection from trade receivables X Payment to trade payables X

Additional capital X Cash drawings X

Income received X Expenses paid X

Sale of non-current assets X Purchase of non-current assets X

Balance c/d (overdraft) X Balance c/d X

• Reconstruct expense account to find missing information such as expense to be
charged in the Statement of Comprehensive Income.

Expense Account
Prepayments b/d X Accruals b/d X

Expense paid X Expense charged to SOCI X

Accruals c/d X Prepayments c/d x

• Reconstruct revenue/income account to find missing information such as revenue to
be recognized in the Statement of Comprehensive Income.

Revenue Account
Accruals b/d X Prepayments b/d X

Revenue recognized in SOCI X Revenue received X

Prepayments c/d X Accruals c/d x

5.6 FINANCIAL STATEMENTS (STATEMENT OF
PROFIT OR LOSS AND STATEMENT OF FINANCIAL
POSITION)