AA015 TOPIC 11

FINANCIAL ACCOUNTING
AA015

KOLEJ MATRIKULASI
NEGERI SEMBILAN
SESSION 2020/2021

ACCOUNTING FOR

INCOMPLETE
RECORDS

AND

SINGLE ENTRY

At the end of the lesson:

1. You can give definition and identify the problems
that exist in the incomplete record and single
entry.

2. You can calculate the net profit by using
Comparison Method And Analysis
Methods.

3. You can provide the Income Statement and
Balance Sheet uses both methods.

Learning objectives :

1. You can give definition and identify the
problems that exist in the incomplete
record and single entry.

2. You can calculate the net profit by using
Comparison Method And Analysis
Methods.

3. You can provide the Income Statement and
Balance Sheet uses both methods.



INCOMPLETE RECORDS

The records of the business are considered incomplete for
several reasons such as:

1. A business is using single entry system if they record financial
activities using combination double entry, single entry or no
entry at all

2. Only the most simple records may be kept such as cash
disbursements, cash receipts, cheque book, files of suppliers’
invoices, debtors book.

3. Asset and liability records are usually not tracked in a single
entry system; these items must be tracked separately.

DISADVANTAGES:

1. Trial Balance cannot be prepared to check the arithmetical accuracy of
books of accounts.

2. Information related to assets and liabilities cannot be reliable because
respective accounts have not been maintained.

3. True Profit/Loss cannot be ascertained.

4. Comparison of accounting performance with previous year or other firms
not possible as any standard principle or procedure is not followed.

5. Corruption and forgery hard to be detected

DETERMINATION OF
PROFITS/LOSSES

COMPARISON ANALYSIS
METHOD METHOD

1. Comparing the capital of the business in the beginning of
the period with its capital at the end (closing) of the
period.

2. If the closing capital is more than opening capital, it
shows a profit for the business.

3. If the closing capital is less than opening capital, the
business had a loss.

4. Prepared Statement Of Affairs In oder to get capital (either opening capital or closing capital)

Statement of Affairs as at XXX RM RM
XX
ASSETS (NCA & CA) XX XXX
Land XX
Building (Net) XX (XXX)
Motor Vehicle (Net) XX XXXX
Office Equipment (Net) XX
Cash XX
Bank XX
A/c Receivable XXX
Prepaid Expenses
Accrued Revenues

LIABILITIES (NCL & CL) XX
A/c Payable XX
Accrued Expenses XX
Prepaid Revenues XX
Bank Overdraft XX
Bank Loan

CAPITAL/OWNER’S EQUITY

Basic Formula : Capital = Assets – Liabilities

EXAMPLE 1

Ahmad commenced a business on Januari 2015 as Mesra
Enterprise. Based on the following information , prepare a
statement of profit and loss as at 31st Disember 2015

Balance at bank 1st Jan 2015 31st Dec 2015
Account receivables (RM) (RM)
Inventory
Fixtures and fittings (net) 1,000 3,850
Account payables 3,900 4,000
Rent and rates payables 5,600 6,800
4,400 8,200
5,200 4,000

250

Additional information:

i. Every month Ahmad withdraw RM300 cash and goods RM100
for his personal use.
Dr Drawing(+) 400

ii. Ahmad contributed a further RM2,500 cash as capital.
Cr Capital (+) 2,500

Required:
a) Calculate opening and closing capital.
b) Prepare a statement to calculate profit and loss for the period

ended 31st December 2015
c) Prepare statement of financial position for the period.

ASSETS RM
Balance at bank 1,000
Account receivables 3,900
Inventory 5,600
Fixtures and fittings (net) 4,400
14,900
LIABILITIES
Account payables (5,200)
Opening capital 9,700

ASSETS RM
Balance at bank 3,850
Account receivables 4,000
Inventory 6,800
Fixtures and fittings (net) 8,200
22,850
LIABILITIES
Account payables (4,000)
Rent and rates payables (250)
Closing capital
18,600

Statement of Owner’s Equity RM RM

Closing Capital 18,600
Add : Drawings (400 x12) 4,800

Less: Additional Capital 23,400
Opening capital 2,500
9,700 (12,200)
Profits
11,200

NON CURRENT ASSETS 3,850 8,200
Fixtures and fittings (net) 4,000
CURRENT ASSETS 6,800 14,650
Balance at bank 22,850
Account receivables 9,700
Inventory 2,500 18,600
11,200 4 000
OWNER’S EQUITY 23,400
Opening capital (4,800) 250
Add : Additional Capital 22850

Profits
Less :Drawings (400 x12)

Closing capital
CURRENT LIABILITIES
Accounts Payables
Rent and rates payables

RECONSTRUCTION OF LEDGER A/C:
*Reconstruct:
- Receivable control a/c : to find credit sales & payment

sales
- Payable control a/c : to find credit purchases & payment

made during the year.
- Cash Book: to find closing balance, cash sales &

purchases, drawing ect.
- Expenses & Revenue a/c: to find expenses incurred and

revenues earned for the year (both charged and
recognised in Income Statement).
- Non current asset a/c : to find depreciation, acquisition
& disposal during the year.

EXAMPLE 2

Below is the Account Receivable of Suasuwi
Co.

Opening balance RM 10,000
Cash Sales RM 400
Cash Received RM 4,200
Closing balance RM 15,000

Account Receivable (Adjusted)

Balance b/d Account Receivable 4,200
Sales 10,000 Bank 15,000
**9,200 Balance c/d 19,200
19,200

Total sales = Cash sales + Credit sales
= RM (400 + 9,200)
= RM 9,600

EXAMPLE 3
Below is the Account Payable of Suasuwi Co.

Opening balance RM 4,000
Cash purchases RM 600
Cash paid RM 4,200
Closing balance RM 7,000

Account Payable (Adjusted)

Bank Account Payable 4,000
Balance c/f 4,200 Balance b/f **7,200
7,000 Purchases 11,200

11,200

Total = Cash purchases + Credit purchases
Purchases = RM (600 + 7,200)
= RM 7,800

The data given from the financial record Ish Company at 31st Disember 2015 :
(i) Cash book record

Items Cash CASH BOOK Cash Bank
Bal b/d 1550 Bank Items 1750 3000
Receivable 11 230 Purchases 500
Sales 12 000 5600 Payable 300 5000
Bank loan 7 800 Drawing 1000 1500
Commission 1450 10 000 Salaries 1400

Rent
Insurance

ii. Balance at assets and liability on 1st January and 31st December
2015 are given below :

1st January 31st December 2015
2015

Premise 45,000 45,000
Furniture
Inventories 5,630 5,630
Account receivable
Accrued comission 9,300 1,500
(com. rev. receivable)
Accrued rent 7,620 20,990
Account payable
600 9,900

600 100
750 1,160

i Depreciation all fixed assets is 10%.
(depreciation exp, accumulated depreciation)

ii Drawing of inventories amounted to RM150.
(drawing, purchased)

iii Accounts receivable written off as bad debts RM 250.
(bad debts, acc receivable)

iv Insurance paid on 1 September 2015 for an insurance policy for a year.
(prepaid insurance, insurance exp)

INSTRUCTIONS:

a) Prepare a statement to calculate profit and loss for the period ended
31st December 2015.

b) Prepare a statement of financial position for the period.

(a) Credit sales : SOLUTION

Accounts Receivable 5,600
250
Balance b/f 7,620 Cash
20,990
Sales 19,220 Bad debts 28,840

Balance c/f

28,840

Total sales = cash sales+credit sales
= RM (12,000 + 7,800 + 19,220)

= RM 39,020

SOLUTION
(b) Credit purchases :

Cash Account Payable 750
Balance c/d 500 Balance b/f 910
1,660
1,160 Purchases
1,660

Total = Cash purchases + Credit purchases
Purchases = RM (1,750 + 5,000 + 910)
= RM 5,660

c) Commission revenue

Commission = Cash received + closing accrued commission – beginning
revenues accrued commission.

= RM( 1,450 + 9,900 - 600)
= RM10,750

Commission Revenue receivable

Balance b/f 600 Cash 1,450
9,900
Commission revenue 10,750 Balancec/f
Income statement 11,350
(current)

11,350

d) Insurance expanses

Insurance = Cash paid – closing prepaid insurance
expanses = RM( 1,500 - 1,000)
= RM500

Prepaid Insurance

Balance b/f 0 Insurance expense 500
Cash
Income statement(current)

1,500 Balance c/f 1,000

1,500 1,500

e) Rent Expenses

Rent Expenses = Cash paid + closing accrued rent – beginning accrued rent
= RM(1,400 + 100 – 600)
= RM900

Cash Rent payable 600
Balance c/f 900
1,400 Balance b/f
1,500
100 Rent Expense
Income statement
(current)

1,500

f) drawing = cash drawing + inventories drawing
= RM(300 + 150)
g) Premise = RM450
depreciation
= RM45,000 x 10 %
h) Furniture = RM4 500
depreciation
= RM5630 x 10 %
i) Bad debts = RM563

= RM250

(j) Opening capital calculation : RM RM

Opening Assets ; 45,000 80,930
Premise 5,630 (1,350)
Furniture 9,300 79,580
Inventories 7,620
Account receivable 600
Com Rev Receivable/ Acr commission 1,550
Cash 11,230
Bank
Minus : Opening liabilities 600
Rent payable /Accrued rent 750
Account payable
OPENING CAPITAL

Ish company
Statement of Comprehensif Income
For the year ended 31st December 2015

RM RM RM
39,020
Sales
13,310
(-) Cost of goods sold 25,710
10,750
Inventory, January 1st 9,300 36,460

Purchases 5,660

(-) Withdrawal of goods (150) 5,510

Goods available for sale 14,810

Inventory, January 31st (1,500)

Gross Profit

(+) Sales commission

Income statement ( continue ) RM RM

Less : Operational expenses 500 12,713
Insurance expense 4,500 23,747
Depreciation expense - premise
Depreciation expense - Fixtures N Fittings 563
Wages expense 6,000
Rent expense
Bad debt expense 900
Net Profit 250

Ish company
Statement of financial position
for the period ended as at 31st December 2015

RM RM RM

Non Current Assets 45,000 40,500
Premise (4,500)
(-) Accumulated depreciation
5,630
Fixtures N Fittings 563
(-) Accumulated depreciation

5,067
45,567

Current Assets RM RM RM
Cash
Bank 10,050
Inventory 25,130
Accounts receivables
Commission Revenue 1,500
receivable 20,990
Prepaid insurans
Total Assets 9,900

1,000 68,570
114,137

RM RM RM

LIABILITIES AND OWNER’S 1,160 1,260
CAPITAL 100
Current liabilities
Account payables 10,000 11,260
Rent Payable
Long term liabilities 79,580 103,327
Loan 23,747 (450)
Owner’s Capital 102,877
Opening capital 114,137
(+) net Profit
(-) drawing
Closing capital