Incomplete Records - Principles of Accounting

Incomplete Records - Principles Of Accounting
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Principles Of Accounting
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Some times, businesses, especially small businesses do not maintain a full set of double entry records. Consequently, no trial balance will be produced and a complete set of final accounts cannot be prepared without further analysis of the records that do exist. Where only records available are the assets and liabilities at the beginning of the year and at the end of the year, it is not possible to prepare a Trading and Profit and Loss account. The assets and liabilities are usually listed in a Statement of Affairs (Similar to a Balance Sheet). This would have been called a Balance Sheet if it had been drawn up from a set of double entry records. Like a Balance Sheet, a Statement of Affairs can be prepared horizontally or vertically The only way the profit for the year can be found is by comparing the capital shown in the opening Statement of Affairs with the capital shown in the closing Statement of Affairs.
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The basic formula is: Profit Loss = Closing Capital Opening Capital (Positive figure means Profit and Negative figure means Loss)
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Profit or Loss = Closing Capital + Drawings during the year Additional Capital during the year Opening Capital (Positive figure means Profit and Negative figure means Loss) Calculation of Profit or Loss by converting the Incomplete Records into Double entry Records In this case, in order to calculate the profit or loss of the business during the year, the Trading and Profit and Loss accounts are prepared. For preparing the Trading and Profit and Loss accounts, all necessary information is not available in the books. So first the missing items have to be calculated which are necessary for the preparation of Trading and Profit and Loss accounts. Usual missing items are:Opening/ Closing balances of Debtors, Credit Sales, and Amounts received from Debtors. When any of these items is missing from the question, it can be calculated by preparing the Total Debtors Account as follows. Trade Debtors Account (Total Debtors A/C)
It may be that the difference capital during figures. In this
the owner has made drawings during the year, which will account for some of in the capital figures. Similarly the owner might have brought in additional the year, which will also account for some of the difference in the capital case the formula must again be modified:-
In another way Credit Sales = Closing Debtors + Bad debts written off + Return inwards + Discount Allowed + Receipts from Debtors (Cash and Cheques)- Opening debtors
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Trade Creditors Account (Total Creditors A/C)
Opening/Closing balances of creditors/ Payments to creditors/ Credit purchases. When any of these items is missing, it can be calculated by preparing the following Trade Creditors A/C
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Similarly Credit Purchases = Closing Creditors + Payments to Creditors (By cash and Cheques) + Discount Received + Return Outwards Opening Creditors
Opening or Closing Bank Balance: To calculate any of these, the bank a/c is to be prepared in T form by showing the receipts on the debit side and payments on the credit side.
Closing Bank Balance = Opening Balance + All Receipts All Payments
Opening Capital:- It can be calculated by preparing opening Statement of Affairs by incorporating all the assets and liabilities on the opening date and calculating it as a balancing figure.
Key point Before solving the question, find out the missing items. The next step should be to find out the missing items from the given items in the question. After making sure that, all the items necessary for the for the preparation of the required account, then start preparation. The final accounts will be prepared as in the case of a sole traders final account. The depreciation on fixed assets is calculated by comparing the opening and closing values of the concerned fixed asset. MCQ 1. Which of the following cannot maintain single entry system? A. Sole Proprietor C. Partnership concerns B. Limited companies D. Corporation
2. Why is a statement of affairs prepared? A. To find out capital C. To find out current assets B. To find out fixed assets D. To find out liabilities
3. How are the credit purchases calculated? A. By preparing debtors account C. By preparing creditors account B. By preparing purchases account D. By preparing capital account
4. Single entry system is defective because, under this system: A. trial balance cannot be prepared B. balance sheet cannot be prepared D. all the above
C. trading and profit and loss account cannot be prepared 5. The following information is available:Capital at the beginning $ 5 250 Drawings during the year $ 3 250 Additional capital introduced $ 1 750 What is the amount of capital at the end of the year?
A. $ 3 750 B. $ 6 750 C. $ 10 250 D. $ 250 6. Following details are supplied to you:Opening capital $ 9 700
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Closing capital $ 10 750 Drawings during the year $ 2 150 Additional capital introduced- nil What is the amount of profit or loss? A. $ 1 100 profit B. $ 1 100 loss C. $ 3 200 profit D. $ 3 200 loss
7. The following details are from the books of a business:Capital on 1st January 2003 Profit during the year Capital at 31st December 2003 $ 5 500 $ 2 500 $ 7 250
What is the amount of drawings during the year? A. Nil B. $ 750 C. $ 5 000 D. $ 2 500 8. Following information is given: Opening debtors $ 6 000 Closing debtors $ 7 500 Cash received from debtors $ 12 500 Cash sales $ 4 000 What is the amount of purchases?
A. $ 11 000
B. $ 14 000
C. $ 1000
D. Cannot be calculated
9. Cash paid to creditors can be calculated from: A. total debtors account C. balance sheet B. total creditors account D. statement of affairs
10. Net profit + expenses cost of goods sold = A. gross profit B. income C. purchases D. sales
debtors on 1st January $ 5 000 debtors at 31st December $ 6 000 receipts from debtors $ 40 000 discount allowed $ 1 000 cash sales $ 10 000 What are the total sales for the year? A. $ 42 000 B. $ 41 000 C. $ 50 000 D. $ 52 000 12. The books of a business show the following details: creditors at the beginning $ 2 500 creditors at the end $ 3 000 paid to creditors $ 20 000 discount received cash purchases $ 5 000 What are the total purchases for the year? A. $ 21 000 B. $ 26 000 C. $ 20 500 D. $ 25 000 $ 500
11. The books of a business show the following details:
13. Closing debtors + payments received from debtors + returns inwards + discount allowed opening debtors =? A. bad debt B. capital C. credit sales D. cash sales
14. How are the credit sales calculated? A. By preparing suppliers account C. By preparing sales account B. By preparing creditors account D. By preparing debtors account
15. Cash received from debtors can be calculated from: A. total debtors account C. balance sheet B. total creditors account D. statement of affairs
Assignment questions:Q1. The following information was obtained from the books of a business man who does not follow the double entry system, for the year ended 31st Dec 2003:-
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$ Trade Debtors Bad Debts Provision Premises Trade Creditors Stock Drawings 6 900 400 50 000 5 000 1 000 15 000 2 000 8 000
Provision for Depreciation on furniture Furniture
Salaries owing 200 Loan from Bank 5 000 Calculate the capital on 31st Dec 2003 by preparing a Statement of Affairs on that Date. Q2. Rachels Capital on 1st Jan 2003 was $25000 .Her assets and liabilities on 31st Dec 2003 were:$ Cash in Hand Cash at Bank Long term Bank loan Stock in Trade Trade Debtors Trade Creditors Equipment Premises Expenses Prepaid Expenses owing 25 560 5 000 2 500 4 300 926 6 000 30 000 450 29
Rent received in advance Rent receivable 96 169 During the year ended 31st Dec 2003, Rachel had withdrawn goods for Private use $3000, and had paid to the business $5000 from the proceeds of selling her holiday home. Prepare for Rachel: a) b) A closing statement of affairs at 31st Dec 2003 to find the closing capital A calculation of net profit for the year ended 31st Dec 2003 c) The Capital A/C of Rachel which would appear in her ledger for the year ended 31st Dec 2003
Q 3. Frank Bull is a sole trader, who does not keep complete accounting records. However, for the year ending 31st Dec 2003 the following information was available: 1) On 1st January 2003: Trade debtors Trade creditors Creditors for expenses 2) During the year ended 31
st
$ 12 400 15 700 352 Dec 2003: 1 71 300 90 600 4 820 24 200 750 02 300
Payments received from debtors Payments made to trade creditors Payments made to creditors for expenses Cash sales for the year Bad debts for the year Purchases on credit of goods for resale Cash discount allowed to debtors Purchases returns
2 460 840
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3) On 31st Dec 2003: Trade debtors Creditors for expenses 13 000 510
1. Calculate credit sales and the total sales for the year ended 31st Dec 2003 2. Calculate the amount of closing creditors for the year ended 31st Dec 2003. c. Calculate the amount of expense to be transferred to the profit & loss account for the year ended 31st Dec 2003. Q4. Harry Johnson, a sole trader does not keep a complete set of accounting records. However, for
the year ended 31st Dec2003, the following information was available: $ 1. On 1st Jan 2003 Stock Trade debtors Trade creditors Creditors for expenses 2. During the year ended 31st Dec 2003:63 000 750 8 200 78 000 3 100 1 500 11 400 9 300 12 500 650
Purchases on credit of goods for resale Purchases returns Payments made to creditors for expenses Payments received from debtors Cash discount allowed to debtors Bad debts written off 3. On 31st Dec 2003:Stock Trade debtors Trade creditors
12 600 18 700 23 750
Creditors for expenses 350 From the above information: Calculate: i) ii) iii) The credit sales for the year ended 31st Dec 2003 The total payments made to trade creditors for the year ended 31st Dec 2003 The amount of expenses to be transferred to the profit and loss a/c for the year ended 31st Dec 2003
Q 5. Stock
On 1st June 2002, R. Rithas balances were:$2600,Bank $4100, Trade Debtors $3500, Trade Creditors $1700, Capital $8500
R. Ritha does not keep full accounting records, but the following information relating to the year ended 31st May 2003 is available:Cheques drawn for private expenditure Cheques drawn for expense items Discount Allowed Credit Sales Cash paid into Bank from Cash Sales Cheques Received from Trade Debtors Cheques Drawn for Payments to Suppliers Credit Purchases $6400 $5320 $500 $32500 $25000 $ 26200 $ 39150 $40300 $2600.
On 31st May 2003, the closing stock was valued at Prepare: a)
For the year ended 31st May 2003: 1. The Trade Debtors total account and the Trade Creditors total account. 2. The Trading and Profit and Loss A/C The Balance Sheet at 31st May 2003 b)
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Q 7. The following information was obtained form the books of a sole trader, who does not keep a full set of books for the year ended 31st Dec 2003: 1) Balances on 1-1-2003: Cash in hand Cash at bank Debtors Salaries owing $ 2 500 $ 4 100 $ 6 400 $ 800 Buildings at cost Plant & Machinery Creditors Stock $ 20 000 $ 25 000 $ 4 200 $ 3 400
2) The following receipts and payments were also recorded by him:
Cash sales banked $ 2 500 Cheques received form debtors Purchases by cash Salaries paid by cheque Administrative expenses in cash Payments by cheque to creditors Cash sales Drawings by cheque $ 12 000 Debtors $ 7 000 $ 900 $ 18 000 $ 22 000 $ 5 200 $ 4 000 $ 1 500 $ 2 500 $ 1 020 $ 8 000 Salaries owing Buildings Plant& machinery Creditors Stock $ 1 800 $ 1 000
4) The balances on 31-12-2003 were:-
3) Other information on 31st Dec 2003:1. Discount allowed $ 250 and discount received $ 300 2. Goods returned by customers $ 380 and goods returned to suppliers $200 3. Out of cash sales, he took $ 100 per month for paying rent of the building and $ 15 a week for miscellaneous expenses and the remaining amount only banked. From the above information, you are required to prepare a set of final accounts for the year ended 31st Dec 2003.
payable from 1st January 2002. All sales were made on a cash basis. Part of the takings was used to pay for various expenses, business and private, and the remainder was banked. The following information is available, from his records , even though he did not keep a full set of accounts under double entry system, for the year ended 31st Dec 2002:Sales takings banked Cheques issued for:Shop Fittings & Fixtures Furniture Rent Rates Insurance Trade creditors Cash payments from takings General expenses Drawings for private expenses Packing materials Notes at 31-12-2002 1) 2) 3) 4) 5) The stock was valued at $ 6050 2500 9500 270 2000 4000 5500 1200 600 45000 60550
Q 8. K.King started his business as a retailer on 1st Jan 2002 and put $ 25000 into his business bank account as his opening capital. He found suitable shop premises at a rent of $ 6000 p.a.
Discount received from creditors for prompt payments $ 400 $ 1800 was owing to creditors. Shop Fittings and Furniture are to be depreciated by 10% p.a. Rates are prepaid by $ 300 and provide for the rent owing at the end of the year.
From the above, prepare the set of final accounts for the year ended 31st Dec 200
Q 9. M, Muthu is a sole trader who does not keep a full set of accounts. The following summary of
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his bank account for the year ended 31st March 2003 is available from his books :Balance on 1-4-2003 Receipts from debtors Cash sales Sundry expenses Stationery Drawings Balance c/d 38 400 400 36 000 2 000 320 150 3 000 3 130 38 400 Payments to creditors Rent Rates 20 000 1 200 600
All the business takings have been paid into the business bank account except Assets and liabilities Stock 12 000 3 200 5 000 210 150 2 500 2 250 01-04-2002 14 500 5 000 4 350 225 31-03-2003 Creditors for goods Debtors for goods Rates prepaid Rent owing
$ 2500 which was used by M/Muthu for paying wages $ 2000 and personal purpose $ 500. The following additional information is also available for the year ended 31st March 2003:-
Fixtures at book value
From the above information, you are required to prepare a set of final accounts for the year ended 31st March 2003. Show all your workings. Q10. Silcy is the owner of a sole trading concern who does keep systematic record of his business transactions, however the following information is available from the records he maintained for the year ended 31st Dec. 2000.
1. 1. He deposits all cash receipts into his business bank A/C and makes all payments by cheque. 2. 2. During the year he took $ 400 for purchasing packing materials and $ 25 a week for personal use out of cash sales. 3. 3. The summary of bank transactions during the year were $ 12 500 5 000 10 000 Receipts banked Cash sales Additional capital Debtors Cheques issued for Settlement of amount owing to creditors Buying cosmetic items for his family Business expenses Advertisement Carriage inwards Rent of building Purchase of fixtures 1. 4. Furniture Debtors 6 820 500 1 200 800 150 2 000 6 000
On 1-1- 2000, the following assets& liabilities were recorded:$ 4 500 $ 4 800 $ 200; Hand Machine Stock of the goods for resale $ 3 000 $ 41 800 $ 800
Rent of building paid in advance
Creditors for supplies of goods
On 31-12-2000 1. 2. 3. 4. 5. The unsold stock was valued at $ 2 100 Total amount owed by credit customers was $ 3 100 The total amount owed to sundry suppliers amounted to $ 2 100 The annual rent of building payable is $ 2 400 Furniture & Fixtures and Hand Machines are to be depreciated by 10% p.a Full years depreciation on fixtures is to be charged. 6. The closing bank balance was $ 9 030.
Required to:
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1. Calculate-opening bank balance. Opening Capital, Credit purchases and Credit sales, Total sales, Total purchases. 2. Prepare the full set of final accounts for Silcy for the year ended 31st December 2000. Q11. Bobby Saxton is a general dealer. On 1st November 2001, she had the following assets and liabilities
31st October 2002. Receipts Cash sales Received from credit customers Payments Assistants wages Rent and rates New equipment Stock for resale bought for cash Paid to trade creditors Drawings Vehicle running expenses Heating and lighting General expenses The following matters are to be taken into account:$ 18 240 18 830 10 8 2 4 19 15 3 1 1 940 200 000 200 228 000 590 328 271
Assets and liabilities $ Equipment 35 865 Stock 14 920 Bank Overdraft 11 562 Cash in hand 576 Trade debtors 11 354 Trade creditors 2 614 Vehicle 9 500 Owing for lighting and heating 300 Capital 57 739 The only book of account that Bobbie keeps for recording her business transaction is a cash book. A summary is given below of the entries made in this cash book for the year ended
$ 39 903 Amounts owing at 31st October 2002: $ 96 for rent and rates: $ 120 for heating and lighting. You are asked to do the following for Bobby Saxton. 1. Show your calculation of the total sales and total purchases to be included in the trading account for the year to 31st October 2002. 2. Prepare trading and profit and loss accounts for the year ending 31st October 2002 and the balance sheet at 31st October 2002.
The stock of goods for resale was valued at $ 11 000 on 31st October 2002. On 31st October 2002, trade debtors and trade creditors were $ 7 806 and 5 600 respectively. Depreciation for the year:- equipment $ 345, vehicle $ 1 300 Cash in hand on 31st October 2002, amounted to $ 230 and bank overdraft was
Incoming search terms: incomplete records single entry and incomplete records in accounting single entry and incomplete records Account for incomplete records of a business incomplete records(accounting) incomplete sole trader account incoplete acounting records List out Steps to convert from incomplete records to complete records mcq related to single entry system notes on single entry and incomplete records
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Incomplete Records - Principles of Accounting

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It may be that the difference capital during figures. In this