SINGLE ENTRY AND INCOMPLETE RECORD
There is distinction between single entry and
incomplete record and these mostly happened when financial
record is kept by someone who lack record keeping skills. Thereby, preparing
the account on a single entry basis making it difficult to produce a trail
balance and as such impossible to produce income statement otherwise known as
trading profit and loss account and the statement of financial position, which
is also known as the balance sheet.
In a situation where
the records kept are not enough to ascertain sales and purchases, but one can
ascertain the records of assets and liabilities and few other details, such a
record is termed incomplete record.
Different
Between Single Entry and Incomplete Record
The main distinction
between single entry and incomplete record is that the corresponding entry for
the single entry can be prepared, thereby making it possible to prepare the
trading profit and loss account while that could not be done with incomplete
record. The record of assets and liabilities along with some other details at
the beginning of the year and at the beginning of the year and at the end of
the year are used in an incomplete record to a certain the profit of the
entity.
1.
Statement of financial Position approach
in the case of incomplete.
2.
Matching Concept approach in the case of
single entry
Statement
of Financial Position
This
approach is used in the case of incomplete record. It is used when the
available information is limited to the record of assets and liabilities at the
beginning of the period, records of assets and liabilities at the end of the
year, record of drawings if any and few
details relating to the period.
When
the information available are not enough to ascertain the value of sales and purchases of an entity.
In that case, the balance sheet otherwise known as statement of financial
position will be used to determine the profit of an entity.
ILLUSTRATION
Fadworld does not keep proper book of account for
the year ended 31st December 2020. The following information available
for the year
1st
January 31st January
Stock 14,000
12,000
Debtors 4,000 3,500
Overdraft 2,100
Prepaid
expenses 300 400
Cash 200
Motor
vans 6,000 5,000
Furniture
fittings 4,000
3,000
Creditors 1,000
1,200
Accrued
expenses 1,700
1,400
A. Prepare
a statement to show the profit or loss made by Fadworld for the year ended 31st
December,2020, taking account of the
following information.
i.
N400
of the debtors at 31st December, 2000 were termed bad debt and also
a provision of N 500 is to be made for doubtful debt.
ii.
During the year, the owner withdrawn N1,000 each month from the business.
iii.
During the year Fadword received
donation to the sum of N4000 and paid
it into the business account.
iv.
The following assets are to be
depreciated; Motor van 10%, Furniture fittings 5%.
Explanation
The first step is to
adjust all necessary entries to ascertain the real value at the end of the
accounting period. To determine the profit of the business when the record is
incomplete like this, there will be need to calculate the capital of the
business at the beginning of the accounting period and at the end of the
accounting period. If the capital at the end of the period is higher than the
opening capital, thus indicates a profit. If otherwise, it indicates loss.
SOLUTION
ADJUSTMENTS/WORKINGS (WRK)
Take each of the items of the balance sheet and
adjust them appropriately one after the other.
WRK.
1: Debtors Account
Bal
b/f 3,500
Less:
Bad Debt (400)
3,100
Less:
Doubtful Debt (500)
2,600
WRK.
2: Motor Van
Bal
b/f 5,000
Less:
10% Depreciation (500)
4,500
WRK
3: Furniture & Fittings
Bal
b/f 4,000
5%
Depreciation (200)
3,800
WRK.
4: Drawings
Monthly withdrawal = N1,000
In 12 months = 12 x N1,000
N12,000
Statement of Affairs of
FADWORLD for the year 2020
FADWORLD 1st January 31st December
Statement
of Affairs N
N
Stock
(inventory) 1,4000 1,7000
Debtors
(1)
4,000 2,900
Prepaid
expenses 300 400
Cash 2,200
Motorvan
(2) 6,000 4,500
Furniture
& fittings 4,000 3,800
Overdraft (2,100)
Creditors (1,000) (1,200)
Accrued
expenses (1,700) (1,400)
Capital 23,500 28,200
Formula
for Calculating Closing Capital
Closing
Capital = Open capital + profit + Add Capital - Drawing
Formula
for Calculating Profit
Profit
=
Closing Capital - Open Capital - Add Capital + Drawing
Calculating
Profit of FADWORLD
Closing capital 28,2000
Less open capital (23,500)
4,700
Additional capital (4,000)
700
Add
Drawings (4) 12,000
Profit 12,700
STATEMENT OF FINANCIAL
POSITION/ BALANCE SHEET AS AT 31ST DECEMBER, 2020
ASSETS
Non-current Assets
Motor
van 4,500
Furniture
fitting 3,800
8,300
Currents
Assets
Stock
1,700
Debtors
2,900
Cash 2,200
Prepaid Expenses 4,00 22,500
30,800
LIABILITIES
Creditors (1,200)
Accrued
expenses (1,400) (2,600)
Net Assets (Closing capital) 28,200
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